Final Report Hiren Kariya012

Foreign Exchange risk Management

A Project Report on

“Foreign exchange risk management for export”

AT

AUSTIN ENGINEERING CO. LTD

PATLA, JUNAGADH

Submitted toThe School of Management, Sumandeep Vidyapeeth

In the partial fulfilment of the award of the MBA Degree

Submitted byHiren Karia

SM20090014

Under the Guidance of

Faculty Guide Company GuidePinkal Shah Mr. Bhavesh Parmar Lecturer Personnel ManagerSchool of Management “AEC” Sumandeep Vidyapeeth JunagadhPiparia, Vadodara Gujarat

July, 2010

1 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara


Certificate

Of

Organisation



Certificate from school of management



Declaration

I, undersigned, Hiren c Karia. a student of M.B.A. Hereby declare that the project work presented in this report is my own work and has been carried out under the supervision of Mr PINKAL SHAH of school of management Sumandeep vidhyapitha University, Baroda.

The work has not been submitted previously to any other University for any examination.

Date: Signature

Place: BARODA (HIREN.C.KARIA)



PREFACE

The practical study is more important than theatrical study. Practical studies are the part of M.B.A. course. M.B.A. is a special professional course regarding business. Practical study implied by SUMANDEEP VIDHYAPITH UNIVERSITY in M.B.A

The summer Internship Training is very helpful to the students because students get the practical knowledge about the working of industry and seeing the atmosphere of business units. With the help of this SIP, student develops his awareness about business field.

As a M.B.A. student, I had got an opportunity that how done practical Work in, “AUSTIN ENGINEERING COMAPNY LTD”. It was a great experience for me. I have tried my level best to get as possible as much better work in company. I thanked all members who helped me to get information.

Place : BARODA

Date:



ACKNOWLEDGEMENT

It is great pleasure for me to submit this project report. It has provided a wonderful learning experience.

“A needle alone cannot do anything, but when accompanied by a thread, it can stitch good clothes. The same way without any practical experience, a person has to go through a big challenge regarding this project.” I would like to all those persons who have helped me directly or indirectly in completing this report.

First of all I would like to thank to director “PROF. B.S.PATEL” & ALL FACULTY MEMBERS OF SCHOOL OF MANAGEMENT, SUMANDEEP VIDHYAPITH UNIVERSITY for providing me an opportunity to get practical knowledge apart from theoretical knowledge.

I would like to thank my project guide Mr. PINKAL SHAH for giving me great guidance to make this report.

I would also like to thank my company guide of “AUSTIN ENGINEERING COMPANY LTD.” & all the staff members, who have provided me all necessary information.

I get chance to recognized my gratitude to director “PROF. B.S.PATEL” of “THE SCHOOL OF MANEGEMENT”

I would like thank to my God because without his blessing no work can be completed, I am also very thankful to my parents for their moral support during the project and the people who directly or indirectly gives a fretfully on in preparing this report.

Place : BARODA

Date :



(HIREN KARIA)

Executive Summary

The topic of my project is ““Foreign exchange risk management for export”.

International business has not only contributed to the India growth. But has also helped in

explanation of Indian industry to the success of India. Today in international foreign

exchange risk is major problem in Indian industry so that I was chosen this topic for

reducing foreign exchange risk in this company. The project gave me great learning

experience at Austin engineering company ltd, Junagadh and also gave great experience in

corporate world. Where I got valuable knowledge of corporate sector and most of practical

knowledge in company that how to do business.

The objective of this project is, today, Loss in sale and purchase of product in Import

and Export Company because of currency daily fluctuation is one of the critical problems

which have direct affect to the company. The company occurs huge loss by this critical

problem, so that I have to decide that analysis of currency market fluctuation is great topic

for me and also for the company, Here my objective is also helpful to company minimise

foreign exchange risk .

Now the methodology of the research is secondary data collection. The whole data was

collected through company sales data of last two years in foreign transaction which are

collected from finance manager in company and other data are collected from RBI website

and www.NSEindia.com.Data is analyzed and presented in the form of excel sheet its

interpretation is given.



In the research time Researcher would came to know the fact that without hedging company

occurs huge losses in foreign market due to fluctuation of currency market so that company

should go for the hedging because it reduce the exchange rate volatility and that comes to

minor difference to actual received amount of sales.

Finding in this report in detail for both currency EURO and USD are as under.

EURO RECEIVABLE ACTUAL

Without

hedging Hedging

without

hedging

%

hedging

%

ASSUM

%

TOTAL 581926366.2 29612787024 -717487 -571809 2.622 0.09847 10 %

TOTAL 581926366.2 29612787024 -717487 -564619 2.622 0.09716 7 %

TOTAL 581926366.2 29612787024 -717487 -559826 2.622 0.09629 5 %

TOTAL 581926366.2 29612787024 -717487 -555033 2.622 0.09542 3 %

USD RECEIVABLE ACTUAL

Without

hedging Hedging

without

hedging

%

hedging

%

ASSUM

%

TOTAL 249427804.5 251220087.3 1792282.786 243208 2.212 0.097 10 %

TOTAL 249427804.5 251220087.3 1792282.786 103818 2.212 0.054 7 %

TOTAL 249427804.5 251220087.3 1792282.786 238014 2.212 0.095 5 %

TOTAL 249427804.5 251220087.3 1792282.786 235937 2.212 0.094 3 %

I would like to conclude the topic with little suggestion that Austin engineering co. ltd.

having huge business in euro and us dollar and this kind of currency is very volatile so just

to avoid exchange rate fluctuation company should go for the hedging in both the currency

due to that it will reduce fluctuation till negligible extend.



.

TABLE OF CONTENTS

Chap. No. PARTICULAR Page No.1 Topic 102 2.1 Company Profile 29

2.2 Industry Profile 34

3

Over view of functional area 37(a) Finance 38(b) Marketing 41(c) Human resources 48(d) Operations 59

4

Model application 65(a) Strategic Advantage Profile. 66(b) Porter’s five forces model 67(c) ETOP(environment threats and opportunity profile) 68(d) BCG (model) 69(e) Value chain 70

5

Research methodology 725.1 Objectives and purpose of the study 735.2 Scope of the study, Benefits of the study 735.3 Assumptions 735.4 Types of research design 735.5 Unit of Analysis 745.6 Methods of data Collection 745.7 Sampling if applicable 745.8 Appropriate tools for data analysis 745.9 Limitations of the study. 74

6 Data collection and analysis 757 Findings 868 Suggestion 89

BIBLIOGRAPHY AND ANNEXURE 91



Chapter – 1

Information

About Topic



1.1 SELECTION OF TOPIC

WHY

Today, Loss in sale and purchase of product in Import and Export Company because

of currency daily fluctuation is one of the critical problems which have direct affect to the

company. The company occurs huge loss by this critical problem, so that I have to decide

that analysis of currency market fluctuation is great topic for me and also for the company.

WHOM

The topic selection was done by the Finance as well as Export Department. Finance

department is brain of the company and taken decision for company’s growth. So Finance

department has given me ties topic for research work.

WHERE

The survey research about the comparison between Euro and US Dollar in minimize

loss in foreign exchange market in sales of bearing at Austin Engineering Company

Limited.

WHEN

The time period of this research is 1 May, 2010 to 30 June, 2010. Using the data of last three

years.

HOW

The research is done by company’s monthly sales data to analysis of sales data of

last two years in Austin Engineering co. ltd. Etc.





1.2 DEFINITION AND BACKGROUND INFORMATION ABOUT THE TOPIC.

INTRODUCTION OF INTERNATIONAL BUSINESS

International Business in India looks really lucrative and every passing day, it is

coming up with only more possibilities. The growth in the international business sector in

India is more than 7% annually. There is scope for more improvement if only the relations

with the neighbouring countries are stabilized. The mind-blowing performance of the stock

market in India has gathered all the more attention (in comparison to the other international

bourses). India definitely stands as an opportune place to explore business possibilities, with

its high-skilled manpower and budding middle class segment.

International business is a term used to collectively describe all commercial transactions

(private and governmental, sales, investments, logistics, and transportation) that take place

between two or more nations. Usually, private companies undertake such transactions for

profit; governments undertake them for profit and for political reasons.[1] It refers to all those

business activities which involves cross border transactions of goods, services, resources

between two or more nations. Transaction of economic resources include capital, skills,

people etc. for international production of physical goods and services such as finance,

banking, insurance, construction etc.

Advantages of International Business

Enhance your domestic competitiveness

Increase sales and profits

Gain your global market share

Reduce dependence on existing markets

Exploit international trade technology


http://en.wikipedia.org/wiki/#cite_note-0

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

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

http://en.wikipedia.org/wiki/Profit_(accounting)

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

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

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

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

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

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

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

http://en.wikipedia.org/wiki/Privately-held_company


Reduce dependence on existing markets

Exploit international trade technology

Extend sales potential of existing products

Stabilize seasonal market fluctuations

Enhance potential for expansion of your business

Sell excess production capacity

Maintain cost competitiveness in your domestic market

Disadvantages of International Business

You may need to wait for long-term gains

Hire staff to launch international trading

Modify your product or packaging

Develop new promotional material

Incur added administrative costs

Dedicate personnel for travelling

Wait long for payments

Apply for additional financing

Deal with special licenses and regulations

FOREIGN EXCHANGE MARKET IN INDIA

INTRODUCTION

To buy foreign goods or services, or to invest in other countries, companies and

individuals may need to first buy the currency of the country with which they are doing

business. Generally, exporters prefer to be paid in their country’s currency or in U.S.

dollars, which are accepted all over the world.

When Canadians buy oil from Saudi Arabia they may pay in U.S. dollars and not in

Canadian dollars or Saudi riyals, even though the United States is not involved in the

transaction.


http://www.ehow.com/how_5001247_trade-forex-exchange.html


The foreign exchange market, or the "FX" market, is where the buying and selling of

different currencies takes place. The price of one currency in terms of another is called an

exchange rate.

The market itself is actually a worldwide network of traders, connected by telephone lines

and computer screens—there is no central headquarters. There are three main centres’ of

trading, which handle the majority of all FX transactions—United Kingdom, United States,

and Japan.

History

Foreign exchange system in India - The central government in India has wide powers

to control transactions in foreign exchange. Until 1992 all foreign investments in India and

the repatriation of foreign capital required prior approval of the government. The Foreign-

Exchange Regulation Act, which governs foreign investment, rarely allowed foreign

majority holdings. However, a new foreign investment policy announced in July 1991

prescribed automatic approval for foreign investments in thirty-four industries designated

high priority, up to an equity limit of 51 percent. Initially the government required that a

company's automatic approval must rely on matching exports and dividend repatriation, but

in May 1992 this requirement was lifted, except for low-priority sectors. In 1994 foreign and

nonresident Indian investors were allowed to repatriate not only their profits but also their

capital. Indian exporters are also free to use their export earnings as they see fit. However,

transfer of capital abroad by Indian nationals is only permitted in special circumstances,

such as emigration. Foreign exchange in India is automatically made available for imports

for which import licenses are issued.

Because foreign-exchange transactions in India are so tightly controlled, Indian authorities

are able to manage the exchange rate, and from 1975 to 1992 the rupee was tied to a trade-

weighted basket of currencies. In February 1992, the government began moves to make the

rupee convertible, and in March 1993 a single floating exchange rate was implemented. In

July 1995, Rs31.81 were worth US$1, compared with Rs7.86 in 1980, Rs12.37 in 1985, and

Rs17.50 in 1990.



DEFINITION OF FORGEIN MARKET

Global market in convertible currencies are traded and their conversion rates are

determined. It is the world's largest financial market in which every day, on average, some

one and one-half trillion dollar worth of currencies are bought and sold. Out of this only

about 15 percent is traded for goods or services, the balance 85 percent is traded by the

individual and institutional speculators.

CURRENCY IN INDIA

INTRODUCTION

Currency is the means of purchasing through trade. Today, currency generally refers

to printed or minted money. Sometimes only paper bills are thought of as currency, while

other times coins are included. Currency involves the exchange of goods or services for

cash.

Exchange rates refer to a country's price for the trade of items. Floating currency

means that a country's exchange rate is not fixed or set in place by a main bank, but

fluctuates. Fixed currency, on the other hand, is set and is the opposite of floating currency.

Fixed currency is also called pegged currency and it is not commonly used, although it is

often associated with the Euro and the US Dollar (USD).

DEFINITIONS

Spot: Foreign exchange spot trading is buying one currency with a different currency for

immediate delivery. The standard settlement convention for Foreign Exchange Spot trades is

T+2 days, i.e., two business days from the date of trade execution. An exception is the

USD/CAD (US – Canadian Dollars) currency pair which settles T+1. Rates for days other

than spot are always calculated with reference to spot rate.

Base Currency: In foreign exchange markets, the base currency is the first currency in a

currency pair. The second currency is called as the terms currency. Exchange rates are

quoted in per unit of the base currency. E.g. the expression Dollar – Rupee, tells you that the

Dollar is being quoted in terms of the Rupee. The Dollar is the base currency and the Rupee

is the terms currency.



HISTROY

The origin of currency is the creation of a circulating medium of exchange based on

a unit of account which quickly becomes a store of value. Currency evolved from two basic

innovations, both of which had occurred by 2000 BC. Originally money was a form of

receipting grain stored in temple granaries in Sumer in ancient Mesopotamia, then Ancient

Egypt.

This first stage of currency, where metals were used to represent stored value, and symbols

to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500

years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era

where there was no place that was safe to store value, the value of a circulating medium

could only be as sound as the forces that defended that store. Trade could only reach as far

as the credibility of that military.

Hierarchy of Currencies

As a whole, currencies can be listed in seven categories, namely top, patrician, elite,

plebeian, permeated, quasi and pseudo currency, with decreasing popularity on the world

market (Cohen, 1998). Those currencies are roughly divided into two groups, international

currency and national currency. The first three categories are international currencies while

the rest are national currencies. National currency only circulates in home country, while a

international currency is a widely accepted media of exchange and store of value.

International currencies are widely used outside its national border. Top currencies - the

most esteemed of international currencies - dominate most if not all types of cross-border

activities and their popularity is more or less universal, and there use is not limited to any

geographic region. Patrician currencies, which are used for various cross-border purposes,

while substantial, are something less dominant, while widespread, they are not universal.

DERIVATIVES DEFINED

Derivative is a product whose value is derived from the value of one or more basic

variables, called bases (underlying asset, index, or reference rate), in a contractual manner.

The underlying asset can be equity, foreign exchange, commodity or any other asset. For

example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of


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

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

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

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

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

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

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

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


a change in prices by that date. Such a transaction is an example of a derivative. The price of

this derivative is driven by the spot price of wheat which is the "underlying".

In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines

"derivative" to include-

1. A security derived from a debt instrument, share, loan whether secured or unsecured,

risk instrument or contract for differences or any other form of security.

2. A contract which derives its value from the prices, or index of prices, of underlying

securities.

Derivatives are securities under the SC(R) A and hence the trading of derivatives is

governed by the regulatory framework under the SC(R) A.

The term derivative has also been defined in section 45U (a) of the RBI act as follows:

An instrument, to be settled at a future date, whose value is derived from change in

interest rate, foreign exchange rate, credit rating or credit index, price of securities (also

called “underlying”), or a combination of more than one of them and includes interest rate

swaps, forward rate agreements, foreign currency swaps, foreign currency-rupee swaps,

foreign currency options, foreign currency-rupee options or such other instruments as may

be specified by the Bank from time to time.

HEDGING

Introduction

Risk management strategy used in limiting or offsetting probability of loss from

fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a

transfer of risk without buying insurance policies. It employs various techniques but,

basically, involves taking equal and opposite positions in two different markets (such as

cash and futures markets). Hedging is used also in protecting one's capital against effects of

inflation through investing in high-yield financial instruments (bonds, notes, shares), real

estate, or precious metals.



Currency Hedging

Millions of people around the world invest their money in foreign currency – and it is the

most liquid market out there. There are many ways in which you can potentially make a lot

of money from currency exchange – and in this guide we shall look at the process of

Currency Hedging.

Hedging Presume Entity A is expecting a remittance for USD 1000 on 27 August 08. Wants

to lock in the foreign exchange rate today so that the value of inflow in Indian rupee terms is

safeguarded. The entity can do so by selling one contract of USDINR futures since one

contract is for USD 1000.

Presume that the current spot rate is Rs.43 and ‘USDINR 27 Aug 08’ contract is trading at

Rs.44.2500. Entity A shall do the following:

Sell one August contract today. The value of the contract is Rs.44,250.

Let us assume the RBI reference rate on August 27, 2008 is Rs.44.0000. The entity

shall sell on August 27, 2008, USD 1000 in the spot market and get Rs. 44,000. The futures

contract will settle at Rs.44.0000 (final settlement price = RBI reference rate). The return

from the futures transaction would be Rs. 250, i.e. (Rs. 44,250 – Rs. 44,000). As may be

observed, the effective rate for the remittance received by the entity A is Rs.44.2500

(Rs.44,000 + Rs.250)/1000, while spot rate on that date was Rs.44.0000. The entity was able

to hedge its exposure.

Speculation: Bullish, buy futures

Take the case of a speculator who has a view on the direction of the market. He

would like to trade based on this view. He expects that the USD-INR rate presently at Rs.42,

is to go up in the next two-three months. How can he trade based on this belief? In case he

can buy dollars and hold it, by investing the necessary capital, he can profit if say the Rupee

depreciates to Rs.42.50. Assuming he buys USD 10000, it would require an investment of

Rs.4,20,000. If the exchange rate moves as he expected in the next three months, then he

shall make a profit of around Rs.10000. This works out to an annual return of around 4.76%.



It may please be noted that the cost of funds invested is not considered in computing this

return.

A speculator can take exactly the same position on the exchange rate by using

futures contracts. Let us see how this works. If the INR- USD is Rs.42 and the three month

futures trade at Rs.42.40. The minimum contract size is USD 1000. Therefore the speculator

may buy 10 contracts. The exposure shall be the same as above USD 10000. Presumably,

the margin may be around Rs.21,000. Three months later if the Rupee depreciates to Rs.

42.50 against USD, (on the day of expiration of the contract), the futures price shall

converge to the spot price (Rs. 42.50) and he makes a profit of Rs.1000 on an investment of

Rs.21,000. This works out to an annual return of 19 percent. Because of the leverage they

provide, futures form an attractive option for speculators.

Speculation: Bearish, sell futures

Futures can be used by a speculator who believes that an underlying is over-valued

and is likely to see a fall in price. How can he trade based on his opinion? In the absence of

a deferral product, there wasn't much he could do to profit from his opinion. Today all he

needs to do is sell the futures.

Let us understand how this works. Typically futures move correspondingly with the

underlying, as long as there is sufficient liquidity in the market. If the underlying price rises,

so will the futures price. If the underlying price falls, so will the futures price. Now take the

case of the trader who expects to see a fall in the price of USD-INR. He sells one two-month

contract of futures on USD say at Rs. 42.20 (each contact for USD 1000). He pays a small

margin on the same. Two months later, when the futures contract expires, USD-INR rate let

us say is Rs.42. On the day of expiration, the spot and the futures price converges. He has

made a clean profit of 20 paisa per dollar. For the one contract that he sold, this works out to

be Rs.2000.

Q.1: What is Currency Hedging?

Currency hedging is essentially a way to minimize and control the risk that is involved in

any form of foreign investment strategy. The process of currency hedging attempts to

compensate for any changes in relative value of the specific currency being utilized in the

investment scheme.



The purpose of currency hedging schemes is that by minimizing the exposure of the investor

to negative shifts in the market, that the investor will still have a reasonable return on their

investment even if the specific market plunges.

Q.2: How does Currency Hedging Work?

The way that currency hedging works is that the investor converts or exchanges foreign

currency at a time when the exchange rate is particularly favourable. They would then make

the actual investment with currency that is native to the country in which the investment is

based.

For example, if an American-based investor wants to invest in an Australian company, using

the currency hedging technique they would first convert their U.S. dollars into Australian

dollars and then purchase the stocks in the Australian company using the native currency.

Another way that currency hedging can help protect the interests of the investor is by them

agreeing to sell share after a certain period of time. Typically the shares will be sold at a

lower rate than the exchange rate between the two currencies prior to the purchase of the

shares. However this puts the investor in a situation where the investor can make a

potentially substantial profit should the original currency (such as the U.S. dollar in our

previous example) strengthen against the other. Even if the original currency weakens, this

loss is offset by the contract to sell the shares.

Q.3: Main Benefits of Currency Hedging

The main benefit is the actual aim of currency hedging – to minimize loss and risks to the

investor. It is a great way of dealing with international investment opportunities. Even with

such good risk protection incorporated into the technique, the investor still has the same

ability to make substantial profits. Currency hedging gives investors the peace of mind to

invest in opportunities that would otherwise have been considered too volatile.

Currency hedging is perfect for long-term investors who do not have the time to check and

monitor his investment portfolio each day for fluctuations in the markets.



For those that are successful at currency hedging it can provide protection against

commodity price Exchanges, inflation, currency exchange rate prices and more. It also helps

traders survive through hard markets and economic depressions.

Futures:

A futures contract is an agreement between two parties to buy or sell an asset at a certain

time in the future at a certain price. Futures contracts are special types of forward contracts

in the sense that they are standardized exchange traded contracts.

DEFINITION OF CURRENCY FUTURES

A futures contract is a standardized contract, traded on an exchange, to buy or sell a

certain underlying asset or an instrument at a certain date in the future, at a specified price.

When the underlying asset is a commodity, e.g. Oil or Wheat, the contract is termed a

“commodity futures contract”. When the underlying is an exchange rate, the contract is

termed a “currency futures contract”.

In other words, it is a contract to exchange one currency for another currency at a

specified date and a specified rate in the future. Therefore, the buyer and the seller lock

themselves into an exchange rate for specific value or delivery date. Both parties of the

futures contract must fulfil their obligations on the settlement date.

HOW FIRMS USE CURRENCY FUTURES

Corporations that have open positions in foreign currencies can consider purchase or selling

futures contracts to offset their positions.

Purchasing futures to Hedge Payables:-

The purchase of future contracts locks in the price at which a firm can purchase a currency.

Example

Tetons company orders Canadian goods and upon delivery will need to send C$500,000 to

the Canadian exporter. Thus, Tetons purchase Canadian dollar futures contracts today,

thereby locking in the price to be paid for Canadian dollars at a future settlement date. By

holding futures contract, Tetons does not have to worry about changes in the spot rate of the

Canadian dollar over time.



Selling Futures to Hedge Payables

The sale of futures contract locks in the price at which a firm can sell currency.

Example

Karla Company sells future contract when its plans to receive the currency from exporting

that it will not need. By selling a future contract, karla company lock in the price at which it

will be able to sale this currency as of the settlement date. Such an action can be appropriate

if Karla expects the foreign currency to depreciate against Karla’s home currency.

Closing out a futures position

If a firm that by a currency futures contract decides before the settlement date that it know

longer wants to maintain its position, it close out the position by selling an identical future

contract. The gain or loss to the firm from its previous future position is depends on the

price of purchasing future versus selling futures.

The price of future contract changes overtime in accordance with movements in this spot

rate and also with changing expectation about the spot rate’s value as of the settlement date.

If the spot rate of a currency increases substantially over a one month period, the future

prices will likely increases by about the same amount. In this case, the purchase and

subsequent sale of future contract would be profitable. Conversely, a decline in the spot rate

over time will corresponds with a decline in a currency future price, meaning that the

purchase and subsequent sales of futures contract would result in a loss. Will the purchaser

of the futures contract could decide not to close out their position under such condition, the

losses from that position could increase over time.

FUTURES TERMINOLOGY

Spot price: The price at which an asset trades in the spot market. In the case of USDINR,

spot value is T + 2.

Futures price: The price at which the futures contract trades in the futures market.

Contract cycle: The period over which a contract trades. The currency futures contracts on

the NSE have one-month, two-month, three-month up to twelve-month expiry cycles.

Hence, NSE will have 12 contracts outstanding at any given point in time.



Value Date/Final Settlement Date: The last business day of the month will be termed the

Value date / Final Settlement date of each contract. The last business day would be taken to

the same as that for Inter-bank Settlements in Mumbai. The rules for Inter-bank Settlements,

including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as

laid down by FEDAI (Foreign Exchange Dealers Association of India).

Expiry date: It is the date specified in the futures contract. This is the last day on which the

contract will be traded, at the end of which it will cease to exist. The last trading day will be

two business days prior to the Value date / Final Settlement Date.

Contract size: The amount of asset that has to be delivered under one contract. Also called

as lot size. In the case of USDINR it is USD 1000.

Basis: In the context of financial futures, basis can be defined as the futures price minus the

spot price. There will be a different basis for each delivery month for each contract. In a

normal market, basis will be positive. This reflects that futures prices normally exceed spot

prices.

Cost of carry: The relationship between futures prices and spot prices can be summarized

in terms of what is known as the cost of carry. This measures (in commodity markets) the

storage cost plus the interest that is paid to finance or ‘carry’ the asset till delivery less the

income earned on the asset. For equity derivatives carry cost is the rate of interest.

Initial margin: The amount that must be deposited in the margin account at the time a

futures contract is first entered into is known as initial margin.

Marking-to-market: In the futures market, at the end of each trading day, the margin

account is adjusted to reflect the investor's gain or loss depending upon the futures closing

price. This is called marking-to-market.

Maintenance margin: This is somewhat lower than the initial margin. This is set to ensure

that the balance in the margin account never becomes negative. If the balance in the margin

account falls below the maintenance margin, the investor receives a margin call and is

expected to top up the margin account to the initial margin level before trading commences

on the next day.



1.3 IDENTIFYING THE VARIABLES AND PARAMETERS FOR THE

PARTICULAR STUDY. ESTABLISH THE THEORETICAL

RELATIONSHIP AMONG VARIABLES.

Variables

Identification of variable

Euro/INR

US$/INR

SALES OF THE COMPANY/INR

Theoretical Relationship Among variables

The foreign exchange market is the market in which national currencies are traded.

As in any market, a price must exist at which trade can occur (Woodbury 1999). An

exchange rate is the price of a unit of domestic currency against a foreign currency. If the

exchange rate of the US dollar is higher than the Japanese yen, the US dollar has

depreciated and the yen has appreciated.

The US dollar managed to hold its ground after losing some momentum against the

euro after the release of the second estimate of Q1 2010 GDP came in below expectations at

3.0 percent. In other news, US jobless claims decreased to 4,607 from 4,656 for the week

ending May 15. Look for the dollar to hold close to current levels ahead of thin trading

conditions with the US Memorial Holiday next Monday

The euro remained stronger against the dollar after officials from China and Kuwait

reiterated that they will continue to maintain currency reserves in the single currency. Look

for the euro to hold onto today's gains as it tries to push higher as investors move back into

riskier assets.



LITERATURE REVIEW

Currency competition between

Euro and us dollar

Name of Researcher:- Li Wenhao

Paper No. 18, June 2004

Working Papers of the, Business Institute Berlin at the

Berlin School of Economics (FHW-Berlin)

Badensche Str. 50-51, D-10825

Conclusion

The US dollar has been the dominant international currency. With the inauguration of the

euro in the year 1999, the euro has become the most powerful potential opponent for the

dollar in the international monetary and financial market. Depending on the size of the

member countries of the Euro area, the euro will become comparable not only in

international trade, but also on GDP to the US dollar. Will this shock or big event to the

international monetary system cause further diversification out of dollar? Will the euro have

the chance to challenge the dollar or even replace it as the world leader? Although opinions

differed, the mainstream economists argued that the euro after its creation would more likely

appreciate than depreciate. In any event, nobody appears to have anticipated the magnitude

and speed of the depreciation of euro since 1999. This paper puts forward a number of

explanations for the euro’s weaknesses since its debut depending on various kinds of

models. Both fundamentals and expectations are among possible reasons, but unfortunately,

most of them are not satisfactory.

2. Operational Hedging: A Review with Discussion

Onur Boyabatlı

Technology Management

INSEAD

77305 Fontainebleau, France



Conclusion

In summary, while the existing definitions of operational hedging in operations

management capture the fundamental principles of operational hedging, they are not

complete or fully consistent with the usage in other academic fields. We believe that there is

room in operations management for an operational hedging framework that incorporates and

unifies findings from other fields.

Intense market competition and high levels of economic and technological

uncertainties inherent in the business environment fuel the growth in corporate-level risk

management programs. According to the finance literature, there are several sources of

market imperfections that make volatility costly to firms and that can be managed through

firm-level risk management activities. Financial instruments are effective in managing the

exposures dependent on asset prices such as exchange rate, interest rate and commodity

price. However, many firms have risks stemming from their operations that are not tradable

in capital markets by means of financial contracts. For this reason, operational hedging -

drawing on operational tools to hedge risks - constitutes an important component of firm-

level risk management programs. Indeed, empirical research shows that firms employ

operational means to manage their risk exposures (Allayannis et al. 2001, Pantzalis et al.

2001)

3. Hedging versus not hedging: strategies for managing

Foreign exchange transaction exposure

Name of Researcher: - Scott McCarthy

Senior Lecturer in Finance

Queensland University of Technology

Brisbane, Queensland, Australia

Contact: Tel.: +61 7 3864 5390;

Fax: +61 7 3864 1500;

Email: [email protected]



Conclusion

The general conclusion that can be drawn from the results is that over the period

considered, always hedging is preferable to remaining unhedged for an exporter with an

AUD exposure while remaining unhedge is superior to always hedging for both the SGD

and JPY. The finding concerning the AUD is supportive of those who argue that firms with

an exposure should always Hedge as their comparative advantage is not in predicting

exchange rate movements. With regard to the selective hedging alternatives, the random

walk model performed well, especially so for AUD exposures. The conclusions drawn from

the findings for the SGD and the JPY are not what would generally be recommended to a

firm. On a short term or one off basis this would be extremely dangerous as an adverse

exchange rate movement may cause substantial financial Damage, but the results suggest

that for firms that have exposures repeatedly over a long period of time that hedging offers

no benefit.

In terms of further research, it would be of interest to extend the study to consider

other currencies though it does become difficult in this region with fixed or at least pegged

exchange rates.



Chapter – 2

INFORMATION

ABOUT THE COMPANY



2.1 COMPANY PROFILE

HISTORY, GROWTH & DEVELOPMENT OF COMPANY

The history of “Austin Engineering Co. Limited” started 34 years ago i.e. in 1973 in those

year, there was a great need for some good automatic industry in the field of bearing,

particularly in Saurashtra region. A term of five top qualified persons decided to produce

higher bearing and thus, established a partnership firm namely “ACCURATE

ENGINEERING” in 1973.

On 27th July 1978, due to rapid development and increment in demand of

bearing, it was converted into private limited company. The company at that time was

located at G.I.D.C. estate in Junagadh city.

The growth and development kept on increasing and in 2nd November, 1985 this

company was converted into public limited under the name “Austin Engineering

Company Limited” and purchase the trade mark “AEC” in the year 1994. Because of some

problems such as shortage of paper supply in appropriate place for expansion etc. “Austin

Engineering Company Limited” has established its second unit, on 15th February, 1987,

which is located at Patla, a village nearly 25 km away from Junagadh.

In the initial years this company was producing only 40 to 50 varieties of

bearing. Today it produced 4500 of bearing. A good and efficient working staff and

management had leaded the company world of manufacturing. At present the condition of

his industry is very good. The process of this company is going on day by day.

A good and efficient working staff and management leads to company would be

manufacturing at present the condition of this industry in sound a progressing day by day.

Company introduce themselves as one of die-leading manufacturing of antifriction rolling

bearing on India. The company are in this field since last 37 years.

“AUSTIN ENGINEERING COMPANY LTD” Patla, Junagadh (“AEC” Brand) the unit

has been awarded an ISO / TS 16949: 2002 certified Certification.



Now, company would like to idea about their sales. Company’s last year’s sales

were 21 lakhs pieces. Such as the U.S.A. & European Union, nation 85% was direct supply

to OEM’s and actual users such as:

Indian Defence: Automotive Manufactures

Steel Rolling Mills : gear box Manufacturing

Rolling Mills Machinery Manufacturing : Pumps manufactures

Materials Handling Equipment Manufactures: Papers & Pulp Industries.

Construction Equipment Manufactures: Mining Industries.

State owned Public Transport services: Power generation plants.

On rate contract U.P sugar Co-op. and Corporation also approved by FAG, India. An

then rest was to Indian replacement (After Market).

Company manufacture all types of metric and inch services ball and roller bearings. That is

single and multi raw radial, angular and thrust contact types ball bearings, cylindrical roller

bearings, spherical roller bearing, and needle roller bearings.

Fast development and Flexible manufacturing system are out strength. Company can

develop and manufactures bearing and components falling in their manufacturing range

within two months with flexible manufacturing system. They can manufacture small

practically viable batches.



Milestone

The AUSTIN ENGINEERING COMPANY is one of the leading manufacturers of Ball & Roller

Bearings in India. It was founded by five technocrats as Partnership Firm in 1973.

Today the company has developed into a Public Limited Company, with full array of high quality

and precision bearings for different applications. The company’s stringent quality assurance system

has earned ISO 9001:1994 accreditation for the plant located near Junagadh in Gujarat.

1973 Partnership firm formed by five technocrats.

Started manufacturing needle roller cage assemblies with the manpower of 10 and

the capital investment of 3500 US dollar.

1974 Started manufacturing cylindrical roller bearings and deep groove ball bearings up to

Outside Diameter of 50 mm.

1975 Started manufacturing Single row Spherical roller bearing for steering application in

Telco‘s Light and Heavy commercial vehicles having Mercedes – Benz

collaboration.

1978 Partnership firm converted into private limited company.

Started manufacturing tapered roller bearing up to outside dia. of 100 mm.

1980 Manufacturing capacity of all aforesaid bearings increased up to outside diameter of

150 mm.

1982 Started supplying bearings for gearbox application to Premier Automobiles Limited

(Fiat – Italy collaboration) for their passenger cars.

1984 Started supplying case – carburised specially heat treated ground components

(exclusive supplier) and king – pin bearings to TELCO for their light and heavy

commercial vehicles. (Mercedes – Benz collaboration).

1985 Converted into public limited company and shares / stocks offered to public.

1986 New plant (unit –2) started with installation of machineries and testing / measuring

equipments imported from the Germany, U.K. and the United States of America.

Started exporting bearings to developed nations such as the U.S.A., the U.K., Italy,

and other E.U. countries.

1987 Entered into a manufacturing of import substitute bearings for battle tanks and light



and heavy armed vehicles of Indian Defence department.

1990 Manufacturing capacity increased up to outside diameter of 600 mm.

Started manufacturing large dia. double row tapered and spherical roller bearings.

1991 Awarded indefinite rate contract by Association of State Road Transport

Undertakings of India (A.S.R.T.U.) for 78 sizes of bearings for their passenger

vehicles.

1993 Started manufacturing flexible roller bearings.

Started manufacturing of multi-row cylindrical roller bearings for Sendzimir cold

strip mills.

1995 Manufacturing capacity increased up to outside diameter of 800 mm.

1997 Started manufacturing flush ground single row angular contact ball bearings for the

U.S.A. and European market.

1998 Participated in global tender floated by Bokaro steel plant and secured order for two

sizes of large dia. four row tapered roller bearings. (Roll-neck application).

Started production of four row tapered roller and multi row cylindrical roller

bearings for roll-neck application in steel plant.

1999 Awarded ISO 9001 certification for design and manufacturing of all types of rolling

bearings from TÜV Rheinland certification body.

2000 Establishment of AEC Europe S.r.l. in Milan (Italy) and started working with

globally well known bearing manufacturers.

2001 Became approved supplier to one of the world leading bearing manufacturer.

Commenced supplies of bearings including coal mill bearings to thermal power

stations.

2002 Developed stainless steel (Grade 440 C) bearings – ball cylynrical and needle

bearing for atomic energy application.

Developed and supplied slewing ring bearings, ringing OD from 250 mm to 600 mm.

Upgraded from ISO 9001 : 1994 to ISO 9001 : 2000.

2003 RDSO (Indian Railways Source and Quality accrediting sole authority) Approval

received for loco transmission bearings.

2004 Developed QJ 200 & QJ 300 series for export markets. Also developed 3200 and

3300 Series for Export.

2006 Awarded ISO / TS 16949 : 2002 by TÜV Rhineland

2008 Company has entered in Export house



WHO’S WHO: - ORGANISATION CHART



2.2 INDUSTRY PROFILE

Competitive Scenario

Now a day, we can see competition in almost every field up to some extent. Competition

affects the customers, sales figures and other aspects of marketing. A healthy competition

may prove beneficial but cut throat competition may create hazardous effect on the

company.

As far as Austin is concerned, it faces no competition at local level because it is

having the largest range of bearings in Asia. Still it has some competitors in the country but

they all are in collaboration with foreign companies while Austin is not having any such

collaboration. So it is the plus point. The competitors are of Austin industries which are as

under.

SKF

NBC

FAG

RHG

KOYO

NTN

The Company has in monopolistic market so there is a large number of buyers and large

number of sellers.

Market Share

Industry Life Cycle & Growth.

The product life cycle concept describes the various stages in the life of a product from

introduction to decline. A product which is introduced will eventually die out but the

number of year in each stage, particularly the ones generating maximum yield.

Austin is continues growth because year by year increase his profit. So that we can say that

Austin is now on the stage of growth in the industrial life cycle.



Environmental Framework

ECONOMIC:-

Economic factors which generally affect company environments are:

Interest rates, productivity, employment, income, inflation and wealth, availability of credit

facility that influence of market from company services, employees care services with staff

care services.

The relationship between economic growth and Bearing Industries Growth rate can be given

by:-

High Economic Growth=High Industrial Production=High Demand for Electricity=more

sales in also other countries. The economic growth of India and countries, such as USA and

Australia that are huge market. As a result any economic growth rate and Bearing Industries

growth rate goes highly in today’s market.

SOCIAL ENVIRONMENT:-

Social environment is generally which affects people live, believes, values and norms.

Social environment affects the industry in the greater way because company serves health

related benefits for societal benefits.

One of the most important Aspect of Austin is to create awareness among people important

of health care and infection control.

The Social environment of Austin is affected by both internal and external factors.

The company is affected by some internal environment are: Employees

stagnancy, Responsibility, Payment benefits, ethicality in work.

Similarly there are some external factors which affect which affect social

environment of the Hospital are: - Relationship with customer and other corporate

organization, Customerization, privative measures, satisfaction level, Affordability,

operative measures, preventive measures, Behaviour etc.



TECHNOLOGICAL ENVIRONMENT:-

Technology plays a vital role in today’s scenario without upgraded technology any firm

cannot be run for last long. In Austin if we talk about technology, the first thing comes to

any one mind is updated machinery or technical instrument including management

functions. Technological environment affects both the internal and external source in

company.

POLITICAL/LEGAL ENVIRONMENT: -

Political environment is composed of laws government agencies & pressure groups that influence

and limit various organizations and individuals. Many times these laws create opportunities for the

organization.

Sets the basic rules for how a business cannot operate in society.

Without legalization the company can make its place on the market.

The legal aspect also includes the government. Because the highest authority is the

government.



Chapter – 3OVERVIEW

OF

FUNCTIONAL AREA



3.1 OVERVIEW OF FUNCTIONAL AREA

(a) FINANCE

INRODUCTION

Finance is the thing which converts the plans into reality. In the past days, there was

a narrow approach regarding this important factor i.e. the procurement of funds was of only

importance in financial management. But now, a broader scope of this has been developed

which includes in addition to procurement of funds and efficient use of resources.

The theme of financial management is structure round the decision making in the

three inter related financial areas: Investment – long term as well as current assets.

Financing and dividend policy. Also included are the important tools of financial planning

and management.

The relationships for financial management are spread throughout the organization in the

sense that financial management is, to an extent, an integral part of the job for the managers

involved in planning, allocation of resources and control. Financial decision is of crucial

importance. It is, therefore, essential to set up an efficient organization for financial

management function.

FINANCIAL PLANNING

Financial planning refers to the planning regarding procurement, utilization and

control of funds required by the firm. The decisions regarding planning of these inter related

financial areas are taken under this. The areas are:

Investment decision – long term as well as current assets

Financing decision

Dividend Policy decision



The planning is the first step and so other steps in financial management are

dependent in it. So it is very important to plan it efficiently so that it will be beneficial for

the firm in future.

In Austin, the financial planning is done on the basis of time period. Thus, there

are three types of financial planning in the company: short term, medium term and long

term. Short term planning is done for one year, medium term is for five years and ling term

is for ten years. Short term planning is used to fulfil the requirements of day to day expenses

and production, medium term is used to increase working capital and funds to replace the

machines and long term planning is used for expansion and modernization.

SOURCES OF FINANCE

Financial management involves the three important areas: investment decision,

financing decision and dividend policy decision. Among them, the investment decision is

the first step to be taken up by the owners. This involves the decisions regarding the

procurement of funds. So it is necessary to study the different sources of finance available.

This decides the cost of capital. So the sources you select to procure the funds should be

such that they would minimize the cost of capital. The terms and conditions of different

institutions should be studied and compared while taking the decision about borrowed

capital. The balance between owned and borrowed capital should also be kept in mind at

that time.

At the initial stage of business firm, generally capital is brought by the owner and

some outside institutions, banks etc. But when the business starts growing, the reinvestment

of profits becomes also an important source of capital.

Here, Austin is a public limited company. So it is having share capital as a major

source of finance. Some borrowed capital is also brought in the company. Moreover, now


Planning Period Purposes

Short term 1 Production and day to day expenses

Medium term 5 To increase working capital and

funds to replace machines

Long term 10 Expansion and modernization


the retained earnings have also become an important source of finance for the company. The

sources of finance are as under:

Equity Share Capital

Bank of Baroda

ICICI Bank

CAPITALIZAITON

Capitalization means total among of long term funds available to the company

which includes shares and debentures, issued by the company and also long term loans

taken from financial institutions. As far as earned profits remained to be distributed are

concerned or it is necessary to classify them as either capital surplus or revenue surplus. The

amount of capitalization should be only that much which can be justified by the profits and

by the normal rate of return for the industry.

Over Capitalization:

A company is said to be over capitalized if its earnings are less in relation to its

capital investment. The company may be having a low earning capacity. Thus, it results in

over capitalization.

Under Capitalization:

A company is said to be undercapitalized if its earnings are more in relation to

its capital investment. Under capitalization is an indication of effective and proper

utilization of funds employed in the business. Under capitalization indicates sound financial

position and good management of the company.

Austin’s earnings are Rs.3, 73, 10,646 and investment is Rs. 12, 47, 61,492. Thus,

earnings are less than investment. So we can say that the company is over capitalized.

MANAGEMENT OF FIXED ASSETS

Assets, representing economic resources, are the valuable possessions owned by

the firm. These possessions owned by the firm should be capable of being measured in

monetary terms. Assets are of two types:

TANGIBLE ASSETS:



They are the assets which have physical existence and generate goods and

services. It includes land, machinery, equipment, furniture etc.

INTANGIBLE ASSETS:

They are the assets, which do not generate goods and services directly and have

no physical existence. It includes patents, copyrights, goodwill, trademarks etc.

(b) MarketingINTRODUCTION

Marketing is so basic that it cannot be considered a separate function. It is the

whole business seen from the customer’s point of view. Business success is not determined

by the producer but by the customer. Today, companies find themselves competing in a race

where the road signs and rules keep changing, where there is no finish line, no permanent

“win”. They simply must keep racing, hopefully in a direction where the public want them

to go.

Marketing management, today, is a subject of growing interest in all types of

organizations within and outside the business sector in all kinds of circumstances. It is the

conscious effort to achieve desired exchange outcomes with the target markets. The

marketer’s basic skill lies in influencing the level, timing and composition of demand for a

product, service, organization, place person or idea.

PRODUCT MIX

Product mix plays an important role while determining the pricing policy of any

organization. It can be defined as the set of products offered for sale by a company. It shows

the mix of different characteristics of the products of the company, means the total number

of products are included on product mix is a list of all product offered by a company.

Any company’s product mix has a certain width, length, depth and consistency.

Width : - It refers to how many different product lines the company carries

Length : - It refers to total number of items in the mix.

Depth : - it refers to how many variants are offered in each line of product.

Consistency: - It refers to how closely relate the various product lines to each other.



In Austin, the product mix can be explained by a chart shown below.

From above chart, we can see that Austin is having only one product line i.e.

bearing which also can be said the width of the product mix. The length of the product mix

is having six different types of bearings and under that they have various sizes under each

type. Thus, total items they are producing are about 3000 different bearings in size and type.

When we talk about consistency, all the products are related in channels of distribution,

consumer needs and other factors because f a common product line.

MARKET SEGMENTATION

Market consists of buyers, and buyers differ in one or more respects. They may

differ in their wants, purchasing power, geographical locations, buying attitudes and buying

practices. Any of these variables can be used to segment a market.

It is a process of dividing the total market for goods and services into small

groups, such that the members of each group are similar with respect to factors that

influence demand. It is a strategy of ‘divide and conquer’ i.e. dicing market in order to

conquer them. Its philosophy is something for everybody within practicable limits. It

enables the market to give better attention to the selection of the customer and offer an

appropriate marketing mix for each segment for a group of buyers having homogeneous

demand.

In Austin, they have selected target market to satisfy the wants of customers. They

have divided the target market in different division.

Indian defence department

Steel plants and steel rolling mills

Textile machinery manufactures

Power plants

Automotive industries

Indian railways



Process industries

State toad transport undertakings throughout India

Overseas customer in the USA, the UK. EU nations etc.

Replacement market/after market



MARKETING RESEARCH

In the long history of the business, management devoted of its attention to

managing money, material, machines and men. But today, management has recognized the

critical importance of fifth resources, information. Well known companies know that what,

where, how, and when of their customers and this is done through paper marketing research.

Every firm must organize the flow of marketing through proper marketing research. Every

firm must organize the flow of marketing information of its marketing manager. Companies

are studying their mangers information need and designing marketing information system to

meet these needs.

Marketing research is a the systematic design, collection, analysis and reporting

if data and findings relevant to a specific marketing situation the company in other words, it

is a process of collection, organizing, analyzing and interpreting the public views regarding

the product, their demand, their suggestion etc. towards improvement and modification of a

product. For a stable and continuous market, market research is a must.

There are various methods of marketing research. By appropriate method, companies can do

the marketing research. These are as follows:

Survey method

Observation method

Panel method

Experiment method

Among all these methods, Austin generally uses any of these methods as per

requirement. According to marketing research of the co., they think that it is important

because it can give firsthand knowledge of the customer and change in pattern of demand. It

is also useful in formulation market strategies. Price, brand and package etc. are the areas of

marketing research. To collect data, they use multi-media like survey, panel approach,

experiment approach, observation etc.



PRICING POLICY

Price is the exchange value of product or service, which is expressed in terms of

money. It is the only element in marketing mix which produces revenue: the other elements

produce costs. Price is also one of the most flexible elements of the marketing mix, in that it

can be changed quickly, unlike product features and channel commitments. Decision about

pricing means the pricing policy is considered important aspect for success of marketing of

any product for any organization. While formulating pricing policy, the following questions

should be kept in mind:

How should a price be set on a product or service for the first time?

How should the price be adopted over time and space to meet varying circumstances

and opportunities?

When should the company initiate the price change, and how should it respond to a

competitor’s price change?

Austin is manufacturing industrial goods. Consumers but are used for making

the final product do not directly use bearing. There are different prices for different types

and sizes of bearing. The cost of production is also considered while pricing. Moreover, the

price depends on other factors like bulk purchasing and the prices are set by the competitors.

Thus the pricing policy of Austin is formulated by the following factors.

Cost of production

Quantity of good purchased

Size and type of the product

Price of the competitors’ product.

SALES PROMOTION

Sales promotion refers to the promotion activities, which stimulates consumer

purchasing like displays, exhibitions, show rooms, demonstrations, free samples, coupons,

premiums, contests and many other selling efforts. It is an important instrument in

marketing to lubricate the marketing efforts. Today, sales promotion is a necessary and not

expense but it is an investment, which can pay rich dividends. Sales promotion is a vital link

between advertising and personal selling. It aims at stimulating consumers’ purchasing at

point of sale and at retail channel of distribution, particularly because retailing is highly



competitive. In short, by sales promotion all prospective buyers are attracted, urged and

even persuaded to buy the product.

Austin has paid attention to sales promotion because of its vital role in increasing

sales. It uses sales promotion at consumer level and dealer level. They promote sales by

giving gifts to the consumers and dealers like dairies, paper weights, clocks, pens key chain

etc.

ADVETISING

Nothing except mint can make money without advertising. Advertising is any

paid form of non promotion of ideas, goods or services by an identified responsive. It is a

form of mass communication and paid by seller who wants to communicate about his

product or services to his customers. It is a very important promotional tool in the hands of

marketing manager. The adviser or the sponsor wants to persuade and induce the readers,

viewers or listeners to take some action and i.e. to buy the advertised products, so that the

advertiser has profitable sales. It appears in the recognized media such as T.V., magazines,

radio, newspapers, hoarding, posters etc.

Austin is one of the leading companies in manufacturing of bearings and as it

has selected O.E.M. (Original Equipment Manufacturer) as largest market, the company

does not require advertising its product goods rather than consumer goods. If the company

fined the need of advertisement, it advertises the product in print media and by hoarding.

PUBLICITY

Publicity has now become important marketing function. The total process of

building goodwill towards a business enterprise and securing a bright image of the company

is called public relations. It creates a favourable atmosphere for conducting business.

There are four groups of public:

Customers

Shareholders

Employees

The community



The marketers should have the best possible relations with these groups.

Effective marketing communication is not possible without establishing and maintaining

mutual understanding between the company and its customers. Publicity works as a

lubricant for making the wheels of marketing run smoothly.

Austin always accepts the sponsorships or cultural programs, sports

organizations and tournaments to make effective publicity. Sometimes it also gives free of

charge products to these organizations, which run for the purpose of social services and

public welfare.

CHANNELS OF DISTRIBUTION

Distribution channel decisions require a special attention as this involves long

term commitments to the other firms with whom marketer enters into contracts. The most

fundamental factor for channel choice and channel management is the economic criteria i.e.

cost and profits. But there are number of other factors such as nature of the products, market

trends, competition outlook, pricing policies, typical consumer needs and manufacturer

himself who should be considered. There are two types of channel:

Direct Channel

Indirect Channel

Austin is producing bearings and i.e. industrial goods. So in this case, direct

channel will be more effective than indirect channel. So the company mostly uses direct

channel of distribution and i.e.

Manufacturer Consumer

For replacement market, the company uses indirect channel of distribution. For

this, they appointed zone wise dealers under whom sub dealers are appointed. This channel

is as under:

Manufacturer Distributors Dealers Consumers



INTERNATIONAL MARKETING

Because of globalization, the international marketing has now become important

for any business. International marketing makes the product of the company world class and

this affects the goodwill of the company positively. It is also important from the view point

of government because international marketing attracts the foreign customers and earns

valuable foreign exchange.

Austin has given importance to international marketing by which they have

created and are maintaining the customers worldwide. They have established branches for

marketing in Italy and U.S.A. The countries in which they are having export customers are:

Italy

U.S.A.

U.A.E.

Sri Lanka

Argentina

New Zealand

By international marketing, the company faces international competition and so

the product is more qualitative as compared to other domestic producers. The company

exports 50% of its total production, which earns valuable foreign exchange.

CUSTOMER SERVICES

Customers services are to determine the customer needs and which satisfying

them. The ascertain and introduces certain standard of services and insure the satisfaction of

customer.

The objective of the company for the customer services is to getting the right

good to right place at right time for least cost. The company provide better services to

customer like better credit that is three to six months, reasonable price and satisfy the

customer, quality assurance. Timely delivery and easy availability of product.

The company inform the customer if the ideal time goes long in case of the

unavailable circumstances.



RESEARCH AND DEVELOPMENT

Progress is needed at every stage and time in any business to be successful. For

this, continuous research and development are undertaken. The demand of customer needs is

necessary for the business.

Austin has a separate research and development department in which the designs

of new and innovative products are developed. The company has developed 3000 sizes in

different types of bearings and still it is developing. The average is 7-8 new designs for

bearing and its components per month are developed in this department. So the company is

still developing in the 32nd year from its establishment.

(c) Human Resource

INTRODUCTION

To achieve the organizational objectives, it is necessary to coordinate the

resources of the organization, i.e., four important resources, which are, man, money,

material and machinery. Among all these, man is of extreme importance because it is like

the driver of a vehicle. A vehicle is of no use until it is driven by someone. Just like this,

machines, materials, and money are of no use until they are coordinated by man. It is also of

paramount importance in the success of any organization because most of the problems in

the organizational settings are of human and social rather than physical, technical or

economic.

The management must therefore be aware not only of the organizational needs

but also of employee needs. The management of “men” is very important and challenging

job, important because it is a job, not of managing “men” but of administering a social

system. The management of men is a challenging task because of the dynamic nature of

people.

Man power management relates to procedures through which human resources

are organized and directed towards the attainment of organizational, social, and individual

goals, moreover human resource is a delicate subject and often it matters more to ‘ who



says’ something than to know ‘what’ he says. If human resource is properly utilized, it may

prove a dynamic motive force of running an enterprise.

ORGANISTAIONAL STRUCTURE

Man power is blood of organization. In the company the day to day affairs are

managed by the team of professional managers under the supervision of managing director

who is headed by the chairman of the company.

In “Austin Engineering Company Ltd” there is a separate human resource department

where all the functions regarding human resource are performed.

RECRUITMENT, SELECTION AND INDUCTION

RECRUITMENT:

Recruitment is the process of searching of prospective employee and simulating them

to apply for job in the organization. In other words it is a linking activity, bringing together

those with jobs and those seeking jobs. Recruiting makes it possible to acquire the number

and types of people necessary to ensure the continued operation of the organization. There

are two sources of recruitment:

Internal Sources;

Promotion

Transfer

Demotion



External Sources;

Advertisement

Employment exchange

Labour union

Gate hiring

Private agencies

Professional bodies

Personnel consultant

Colleges, universities and technical institute.

In Austin, they are using both internal and external sources. Their policy for recruiting

the person through external source is such that, first they give advertisement in newspapers

and they also contact the employment exchanges. Through three sources, i.e., first of all

they collect applications; scrutinize applications received and thereafter appropriate

candidates are called for interviews.

SELECTION

Selection is the process by which the qualified personnel can be chosen from the

applicants who have been offered their service to the organization for employment. Thus the

hands of management differentiate the qualified and unqualified applicants by applying

various techniques such as interviews, tests, etc. In this sense, it is a negative process of

employment in which only a few who are qualified for the job are offered for employment

and others are dented of the opportunities.

Company selects employees through selection committees made of three

members. One of them is works manager, second is manager then third is head of

department. First qualification wise, applications are separated, appropriate candidates are

called for interviews and selection committee conducts interview. For technical candidates,

they have to test technical knowledge.

Thus, selection policy passes through the following steps in Austin Engineering Company

Ltd

Formation of selection committee.

Selection committee conducts interview.

Checking of references.



Physical examination.

Placement.

INDUCTION

When a candidate is finally selected, he or she is issued with an appointment letter and is

asked to join the organization on a specified date. Induction is the follow up action hiring

and concerned with the problem of introducing a new employee to the organization.

After appointing a new candidate, he or she is introduced with the other staff. Concerned

officer makes him aware about rules and regulations of the company.

TRAINING AND DEVELOPMENT

The performance of a person depends on his ability to work and the type of

training he receives. Most of the organizations undertake same king of training for their

employees. In Indian organizations, training and development activities have assumed high

importance in recent years because of their contribution to the achievement of

organizational goals.

TRAINING

Training is the act of increasing the knowledge and skills of an employee for a doing a

particular job. It is generally linked with operational tasks and goal of the organization. It

gives an awareness of rules and procedure to guide their behaviour. It attempts to improve

their performance on the current job to prepare them for an intended job. Training enables

employees to perform their present job in a better way.

Training has become very important act recently in India because of its contribution to

the achievement of organizational objectives. Moreover, it increases employee morale,

reduces supervision, labour problems, accidents and wastage, increases production and

fulfils words; there are various types of training, which are as under:

On the job training

Off the job training



Austin uses training program for the workers who are doing machine work.

They have adopted on the job training method for six months and after that a test is

undertaken, then the performance is checked and then the employee is employed

permanently.

DEVELOPMENT

Development is a long term educational process utilizing a systematic and

organized procedure by which managerial personnel’s procedures get conceptual and

theoretical knowledge. In other words, it refers to not only to technical knowledge and skills

in operation but to philosophical and theoretical educational concepts. It includes broader

education and its purpose is long term and over all development. It covers not only those

activities which improve job performance but also those which bring about growth of

personality, help individuals in the progress toward maturity and actualization of their

potential capacities. So that they became not only good employees but better persons also.

The development programs are linked with the future needs of the organization

and help the employees’ n acquisition of skills and competence needed for future

managerial position. In Austin, development program is not held for executives, but the

officers are often called for meetings, seminars, conference and providing some important

information regarding the company.

JOB ANALYSIS

While manpower inventory is concerned with telling ‘what employees can do’,

job analysis assesses ‘what employees are doing’. From job analysis, specific details of what

is being done and the skills utilized in the job, is obtained. Job analysis enables managers to

understand jobs and job structures to improve work flow or develop techniques to improve

production. It also involves job design or redesign, coordinating demands on available time,

individual psychological needs, technical procedures and desired performance.

Job identification

Significant characteristic of a job

What materials and equipment a worker uses?

How a job is performed?



Required personnel attribute

JOB DESCRIPTION

It is written record of duties, responsibilities and recruitment of a particular job. It is

concerned with the job excel and not with the work. It’s a statement describing the job in

such term as its title, location, duties, working conditions and hazards. In other words, it

tells us ‘what is to be done’ and ‘how it is to be done’ and ‘why’. It is a statement of

function, in that it defines the appropriate and authorized contents of a job.

In Austin, job description is used to formulated manpower management policies and

managerial development through the continuous construction with line managers. It

supervises recruitment, selection and placement of personnel job description. It is used for

taking the decision of promotion and transfer of employees. It is also used for the

adjustment of grievances, evaluation of job and for wage and salary administration.

JOB SPECIFICATION

It is a statement of human qualifications necessary to do the job. It usually contains items

such as education, experience, training, skills, special attitude, premeditative, emotional

characteristics etc. In short job specification is a statement of minimum acceptable human

qualities necessary for the proper performance of a job.

In the company, they have developed appropriate job specifications for different types of

jobs. This statement is used while selecting a candidate for a particular job so that the work

done by him or her will result in efficiency and development of over all organization.

PROMOTION AND TRANSFER POLICIY

Promotion and transfer provide workforce flexibility and mobility to suit the

requirement of the organization. They are the activities through which an adjustment in the

size of workforce of an enterprise in workforce may be needed to meet special situations

such as changes in organizational structure, fluctuations in volume of production and

employment.

PROMOTION:



‘Promotion’ is a term which covers a change and calls for greater responsibilities and

usually involves higher pay and better terms and conditions of service and therefore, a

higher status or rank. A promotion is a vertical move in rank and responsibilities.

Promotions have a salutary effect on the satisfaction of the promoted person’s needs for

esteem, belonging and security.

While establishing the promotion policy of an organization two bases for promotion are

taken into consideration

Seniority

Merit

Austin is having the promotion policy based on both merit as well as seniority. If vacancy

arises in the company firstly selection is being made from internal sources. If any qualified

employee is found there, he is given promotion. While giving promotion, management has

to check work performance regularly and seniority of such employee.

TRANSFER:

A transfer is a horizontal or lateral movement of an employee from one job, section,

department, shift, plant or position to another at the same of\r another place where his

salary, status and responsibilities are the same. Generally, employees are transferred to the

positions where they are likely to be more effective or where they are likely to get more job

satisfaction. Thus, we can say that the transfer is a process of employee’s adjustment with

the work, time and place. In this unit, there is no tendency of employee transfer.

WAGE AND SALARY ADMINISTRATION

‘Wage and salary administration’ is concerned with establishment and

implementation of sound policies and practices to employee compensation. IT involves the

areas or relevant organizational problems, development and maintenance of wage structure,

establishing rules for administrating wages, wage payments, profit sharing, wage cages and

adjustments, supplementary payments, control of compensation costs and other related

terms. A sound wage and salary administration tries to achieve objectives which are

beneficial for both employees and employers.



As far as Austin is concerned, wages are being pain on monthly basis. The date

of wage payment is done on 7th of every month. From the amount of salary, the amount

contributed for provident fund is deducted and then, the remaining amount is paid. The

company pays wages as per Minimum Wages Act to all its workers.

BENEFITS AND SERVICES

Benefits and service are the things that attract a worker’s attention and stimulate

him/ her to work. It influences the individual and group performance. So the H.R. can be

precious asset for the organization. The benefits and services attract the employees and it

also reduces employee turnover.

The benefits and services provided by Austin to their employees are as under:

BONUS FACILITY

Generally, all companies give bonus once in a year to their workers. Austin also provide

bonus to each and every employee once in a year up to some percentage of their total salary

and wages with gifts also.

BUS FACILITY

Austin is situated far away from the city Junagadh, so the workers living in city are provided

bus facility by the company so that there will not be any problem for employees regarding

transportation.

MEDICAL FACILITY

Austin provides medical facilities to the workers for their better safety. They have appointed

doctors for that, Dr. Trambadia, Dr. Thakkar, Dr. Vaishnav and Dr. Dadania.

LOAN FACILITY

The company provides loan to its employees without interest. This includes home loans,

loans for furniture, vehicles, etc.

SAFETY DEVICES

The company provides same safety devices to the workers of production department.

Because some treatment of this department may be hazardous for the worker.



CANTEEN FACILITY

The company provides canteen facility to the workers. In which worker can get lunch and

other snacks at reasonable rate.

OTHER FACILITIES

It includes the facility of free telephone service at home for the executive personnel working

in the company.

NUMBER OF EMPLOYEES

Among the employees, all are not even as far as the skills are concerned. So the distribution

of worker according to their skills is as under.

Skilled worker : 390

Semiskilled : 263

Unskilled : 7

From above distinction, the unskilled and semiskilled workers are given training so that they

can give the best of them to the organization. The list of employees is as under.

PERFORMANCE APPRAISAL SYSTEM

Performance appraisal is the step where the management finds out how effective

it has been at hiring and placing employees. When an employee does his/her work well, the

employee naturally wants to be praised and recognized by his boss and fellow-workers.

Appraisal satisfies human need for esteem by others and for self esteem. Performance

appraisal is one of the most motivator. So that, most of the firms include this system to

make efficient human resource management.

Austin has adopted a systematic appraisal system according to which:

Firstly, work given to an employee is properly observed.



Secondly, they have to see whether the employee is superior to the complete the job

entrusted to him or her and if he/she is able, then he/she is appraised. They have kept secret

records for the workers to avoid any disturbance. This system is useful to take decisions

regarding promotion and other rewards for the work done by the employees.

INDUSTRIAL RELATIONS

‘Industrial relation’ refer to dynamic and developing concept which is not

limited to the complex of relations between trade unions and management but also refers to

the general web of relationship normally between the employees and employers – a web

much complex than simple concept of labour – management conflicts. Industrial relations

pose one of the most delicate and complex problems of modern industrial society. Labour –

employer relationship have become more complex that they were in past and have been

given a clear sharp edge because of widespread labour unrest. In the circumstances, a clear

understanding of the unrest and which are likely eliminate it would be a rewarding

experience for anyone who is interested in industrial harmony.

The industrial relations in Austin are good enough for the efficiency of the unit.

Here, the employees are motivated properly and are given performance appraisal. So they

are satisfied with their employers. On the other hand, employees are putting their efforts in

the direction of growth of the organization. So the employers are also satisfied with their

employees. Moreover, employee-employer relations are also quite satisfied.

GREIVANCE HANDLING SYSTEM

A grievance is any discontent or dissatisfaction, whether expressed or not,

whether sad or not, arising out of anything connected with the company which on employee

thinks, believes or even feels to be unfair, unjust or inequitable. Whenever there is any

discontent among employees, it is bound to result in a turmoil which may affect the interests


Performance appraisal

Production Attendance Attitude


of the management very adversely. Grievances generally give rise to unhappiness

frustration, discontent, and indifference at work, poor morale and they ultimately lead to the

inefficiency of workers low production.

In Austin, grievances arise rarely and if there is any, then it is solved immediately before it

makes a dynamic nature.

The policy that the company has to solve grievances is such that first of all, workers contact

H.O.D regarding their problem. Then, H.O.D consults with personnel department and with

the consultation of H.O.D and personnel manager, grievances are solved.

TIME KEEPING SYSTEM

A time keeping system is useful to establish control and facilitate discipline in

the organization. By establishing good time keeping system, the management can

implement its planning effectively. So the target can be achieved easily. It also plays an

important role in smooth running of the activities of an organization.

Austin is having a separate time keeping department. This department notes the arrival and

departure of every employee. Ere, each worker is provided an identity care. No worker can

enter in the company without that card. The facility of issuing gate apses is to the visitors.

Company’s plant runs in 3 shifts, timings of which are as under:

Time keeping system:

Sr. No. Shift Time Working hours Recess time

1 1st 06.00am to

02.00pm

8 10.00pm to

10.30pm

2 2nd 02.00pm to

10.00pm

8 06.00pm to

06.30pm

3 3rd 10.00pm to

06.00am

8 03.00am to

03.30pm

4 General 08.00am to

04.30pm

8 12.00pm to

12.30pm



OTHER INFORMATION

Provident fund

The object of the provident fund scheme is to save certain amount by each

employee which acts as a source of finance after their retirement. The accumulated fund is

reimbursed in case of retirement, death or dismissal of employee. If employee leaves and

joins other organization covered under PF scheme, the account is subject to transfer

This company provides 24% of the salary as PF. Out of this 24%, the company contributes

10 and the employee the rest. Thus 12 % by company and 12 % by employee.

The company provides 8.33% of salary as family pension. In case of death of employee, the

co. provides the total amount in PF in addition with 1.6% of the salary of dead employee

(d) OPERATIONSINTRODUCTION

Production is accepted as the main cause of a business by all. It is the core activity

by which a business unit reaches its main objectives and i.e. profit. Production can be said

the weapon for this. It plays a very important part in any business firm because the other

activities and departments of the unit are also dependent on this activity.

AUSTIN is a standard company in the production of bearings. They are

producing different types of bearings which are as under:

Ball bearings

Needle roller bearings

Thrust bearings

Spherical roller bearings

Tapered bearings

Cylindrical roller bearings

PRODUCTION PLANNING AND CONTROL



In any business, before starting production process, it is very important to plan

about that production. This includes the forecasting about the various elements of

production. In other words, how much production will be undertaken, in how much time it

should be compared etc. decisions are not taken in this stage. But if those decisions are not

taken properly, there will be wastage of raw material, time, money as well as manpower and

the company may start occurring losses.

AUSTIN plans its production according to the orders they have got for the

production. So, the company as far as the control is concerned, the production is controlled

by the works manager at the different stages of production.

PRODUCTION PROCESS.

Manufacturing process is a process conduced to procedure of manufacture the

product. This is the basic or the main process because each and every activity is depending

on manufacturing process. Following are the raw materials in producing various size of

bearing and the components brought out:

Steel Bars and Tubes

Steel Wire

Steel Ball

CRCA Sheets

Races

Rollers

STAGES OF MANUFACTURING PROCESS

1. Material stage

Raw material is steel bars, steel wire, steel tubes, rollers etc. This company has improved

sophisticated plant and machinery especially from Germany. As the company has to reach

big orders of export market defence on big original equipment manufacturers. So, company

kept six months inventory for raw material and has make contact with their supplier of raw

materials to supply regularly.



Main suppliers in India are:

Mahindra and Mahindra Ltd.

India Seen less Mattel Tubes Ltd.

Suman Das Udyog

Specific Steel Ltd.

Meedumra Industry Ltd.

They store this raw material in store room and when required they inspect and test then

in terms fitness for further production process which are according to purchase order.

2. Turning of Races and Roller:

This is the second stage of step for manufacturing the proper bearing from the raw material

to the finished product. In this stage the races and roller are turned in required sizes by

trained workers and then it is transferred to main unit.

3. Heat Treatment

This is the 3rd stage in this stage all the races and roller are given heat through electric rollers

are given heat through electric furnace at 845 to 855 temperatures through which defective

pieces are removed. It means the testing of races and roller is done to measure the capacity

of the products.

4. Grinding of Races and Rollers

This is the 4th stage, after heat treatment, the part of races and rollers and refined. Inner and

outer part of racer and rollers are given through the grinding machine.

5. Tapping, Happing and Super Finishing

In this stage there are checking of rollers and races because it has single mistake of defect in

outer and inner side of races and rollers. If any aces and roller is defective that pieces is

tapped and happed. Than offer, super finishing will be done on that part. There are done

through their respective machine.



6. Inspection and Grinding

After the procedure for making a bearing all the races and rollers are inspired by the

inspection department and then after grades fixed by the company, the precious sample is

gone mass production.

7. Assembling, Cleaning, Oiling and Packing

There are separate department of bearing all kind of bearing are managed and its size,

quality and shapes is measured and its size, quality and shapes is measured bearing are

assembled. After the assembling of the bearing, the cleaning and oiling of bearing is done

and then the bearing finally goes at packing department where this bearing has given “AEC”

trade mark.

8. Storage and Dispatch

After passing through all the above stage the finished product are stored in go down. From

where they are dispatched as per the order. The transportation capacity is mainly done by

Transport Company.

Production process chart



TIME KEEPING SYSTEM

Time keeping system means how many shifts are there in one day in a particular

company. Time keeping system is much more important in controlling the organization.

The purpose of time system is to established control and facilitated employees discipline.

Now a day’s company is using time keeping system so that the arrival and departure can

make easily.



In “Austin Engineering Company Limited”, there are here about 750 workers.

For a time keeping there is a card system. Every employee given a card having none of the

person and serial number on that card, timing is also written. Time keeping officer notes the

coming and going time out of the company.

This company is working throughout 24 hours a day. The working hours are divided in

to 3 shifts. Every worker is work to 8 hours in the day. Overtime system is available in this

company.

We are showing the different shifts are as under:

POLLUTION CONTROL

Here, pollution control refers to the contribution of the unit in controlling of

pollution. It means the activities of the unit should not be such that pollute the environment.

AUSTIN is not doing any such activity and its product doesn’t pollute the valuable

environment. The plant of the company is located far away from the city. So it is not

harmful for the population of the city. Thus the product is not hazardous for the

environment.

QUALITY CONTROL

The maintenance of the quality is very important for a reputed firm. When the

product of the company is proved qualitative, the company should maintain the same quality


Shift Timing Hours

First 6.00 p.m. to 02.00 p.m. 8

Secon

d

02.00 p.m. to 10.00 p.m. 8

Third 10.00 a.m. to 06.00a.m. 8


standard, because it is useful in creation of customers, to increase market share, to stay in

competitive etc.

Here, “Austin Engineering Company Ltd.” has given special attention on the quality of the

product. It is also an ISO 9001:2000 awarded company because of its quality. Moreover,

they have developed a QUALITY POLICY for better quality control. The company is also

having certain testing instruments for testing the product at different levels. The product

process includes five inspection stages which show the company’s efforts to maintain its

quality. Thus, there is a great attention given to quality control in the company.

Testing instruments

Spectrometer

Micro handless tester

Magna field crack detection

Carbon-supper apparatus

Surface roughness tester

Roundness tester

Electronic comparator

Air gauge comparator

Dial calibrators

Redial clearance measuring instrument



Chapter – 4

MODEL APPLICATION

4.1 MODEL APPLICATION

(a) Strategic Advantage Profile



The Strategic Advantage Profile i.e. SAP analysis of Austin is nothing but the strength and

the weakness of the Austin. It includes every aspect, SAP analyze to help company present

scenario and helps to make necessary modifications from its growth & development and

also to know at which place company is lacking.

Areas Performance ImportanceStrength Weakness RatingGOOD POOR Neutral Minor Major High Medium Low

MARKETING1. Company Reputation

2. Market Share 3. Customer Satisfaction

4. Customer Retention 5. Product Quality

6. Service Quality 7. Pricing 8. Distribution Effectiveness

FINANCE(BILLING & CREDIT CELL)1. Cost of Capital 2. Cash Flow 3. Financial Stability 4. Financial Growth HUMAN RESOURCESRecruitment and selection

Training and development

Job performance Wage and salary Production departmentproduction process

Quality control Pollution control

(b) Porter’s 5 Forces Model:



Michael Porter has identified 5 forces that determine long-run attractiveness of a

market or market segment they are as follow:

Industry competitors, Potential entrants, Substitutes, Buyers and Suppliers.

It helps us to understand market scenario and competition & take fair steps for the growth

and development of the organization. Moreover, one can take various steps in the areas

where we lack and strengthen the organization with new strategies for remaining in the

competition.

THERAT OF SEGMENT RIVALRY: - This explains us that the segment is unattractive if it

already contains number strong competitors. And even more unattractive if it’s stable or

declining.

THREAT OF NEW ENTRANTS: - Austin engineering has set some policies for its entrants.

It has to keep complete protection about how it provides best services with cost effective to

be strong in market to give best competition. Because if any of its revivals get to know its

strategy, they can work on in and gain huge market in the services.

THREAT OF SUBSTITUTE PRODUCTS:-Any segment is unattractive if there are actual

substitutes. It sets limits on price & profit. Austin too has many substitutes which have to be

dealt with care. If any new advanced technology in field of industry services & equipments

is out with its rivals it will create big impact on Austin.


INDUSTRYSupplier’s power

Buyers Power

Threat of substitute

Potential entrants


THREAT OF SUPPLIERS GROWING BARGAINING POWER: - In this segment,

Industry supplier is able to raise price or reduce quality of the product. This applies in the

area of instrument purchase.

THREAT OF BUYERS GROWING BARGAINING POWER: - The segment is

unattractive if buyer possesses strong bargaining power. Bargaining power grows when they

become more organized, when the services is undifferentiated, customer switching costs are

low & are price sensitive because of low profits.

(C ) ETOP (Environmental Threat & Opportunity Profile)

ENVIRONMENTA THREATS: -

Austin’s one of the most important threats is upcoming corporate industry in

providing best services.

Today still there are many reputed company in Gujarat which give Austin toughest

competition in market.

OPPORTUNITY PROFILE: -

Austin’s has great opportunity in future.

Austin considering New Assets Acquisition in the organization.

Austin is the Expansion Plans of the organization.

Env. Factors Threats Neutral Opportunities-3 -2 -1 0 1 2 3

Economic1.Int. rate *2.Productive *3.Income *Social factorsEmployees and staff services *Employees responsibility *Payment benefits *Ethicality in work *Technological factorsUpgrade technology *



Efficiency of machinery *Political FactorsOperate Rules and regulation *Government interfere *Total -6 0 12

Here In the company over all opportunities is more than the threat in Environmental Factors.

Today, company productive is highly efficiency. So that here opportunity for more sales in

market. But in political Factors, company cannot adopt all rules and regulation so it is also

affected to the company.

(d) BCG (Model)

BCG Matrix is basically based on the study of the review note. It is a study of relation

between market share and market growth. And, the level of high and low rating scale is

classified.

BCG Matrix Model:

Stars : - Stars are high growth businesses or products competing in markets where they are

relatively strong compared with the competition. Need of the heavy investment is necessary

to sustain growth.

So, in here, the company relates to heavy investment and in return the heavy returns for their

customers.

Cash Cows: - Cash cows are low-growth businesses or products with a relatively high

market share. These are mature, successful businesses with relatively little need for



investment. They need to be managed for continued profit - so that they continue to generate

the strong cash flows that the company needs for its Stars.

Now, Austin is in the cash cows stage in present.

Question Marks: - Question marks are businesses or products with low market share but

which operate in higher growth markets. This suggests that they have potential, but may

require substantial investment in order to grow market share at the expense of more

powerful competitors.

Dogs:- The term "dogs" refers to businesses or products that have low relative share in

unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they

are rarely, if ever, worth investing in.

Austin Engineering Company now in cash cow stage. But company has good opportunity in

future because most of the factors are in the favour of company and growth rate of company

is also high.

So that if company can enter in stage of STARS in future so company must adopted all

opportunity today for better future in Bearing industry.

(e) Value Chain

The value chain as a tool for identifying ways to create more customer value. Every firm is a

synthesis of activities that are performed to design, produce, and market, deliver, and

support its product. Value chain identifies nine value creating activities consist of five

primary activities and four support activities.

1. Inbound Logistics:

Bringing new material into the business is the purpose of the inbound logistics.

2. Operations:

Operation relates with the motive, goal and subject. A specific goal for the inputs made

in the inbound stage. So, we have to define a goal for the inputs made.



3. Outbound Logistics:

It relates to the finished goods. The product now are been manufactured and are ready

to be launched into the market for their sales and stacks.

4. Marketing & Sales:

The marketing and sales plays a vital role in the part of the product manufacturing for

the company because if marketing is done in a proper way then it is obvious that the

sales of the oil would take place.

5. Services:

It leads the after sales services and the in - stock services given by the company. The

services provided to the customers of the company also plays major role in success of

product launch.



Chapter – 5

RESEARCH METHODOLOGY



5.1 OBJECTIVE OF RESEARCH

To know about the company’s functional area system that which type of system in

each department in company.

To know existing exposure of Foreign Exchange Risk.

Devices strategy to minimize foreign Risk in Company’s export business.

5.2 Scope of the Study

The time period of this research is within two month at Austin Engineering Co. Ltd.

Basically secondary data collection of the last three years.

This Research is only for company’s export and foreign exchange risk in the Austin

Engineering Company Ltd.

5.3 Benefits of the Study

For Company

To decreases the company foreign exchange Risk in sales of company.

To know that how much time period company’s gives for credit.

Company have idea about both the currency that Euro and USD which is more

benefit for the company in sales of product.

For Reader

It can be very useful and gives guidance to those who is research in future in this

area.

5.4 Assumptions

There is exestuation of vitality in Euro & USD against INR.

It is assumes that there is no Brokerage and taxation with hedging ( Possible

assumption)

It is assumes that the foreign exchange quota of foreign exchange taken to device

hedging strategy is available in market.



5.5 Type of Research design

In this Research I will go take a DESCRIPTIVE RESEARCH DESIGN because the

variable is well known and well define. As well as aware about the problem and subject of

the research and also we have idea about solving this particular problem in company.

5.6 Unit of Analysis

Euro/INR

US$/INR

SALES OF THE COMPANY/INR

5.7 Appropriate tools for data analysis

Measurement of standard deviation

Central tendency

Hedging ratio

5.8 Method of data collection

Secondary data collection method

5.9 Limitation of the study

The limitation for the research of topic is awareness of time period and other factor

is Cost.

Data is closed so there is a chance of deviation in actual situation.

The data for research is also less.

It is assumes that the foreign exchange quota of foreign exchange taken to device

hedging strategy is available in market.



Chapter – 6DATA COLLECTION

&

ANALYSIS OF DATA



Invoice DateSales in EURO

Exch Rate Due Date

Exch Rate

Exch rate of Future 10%

30-04-2008 364117 63.0028 15-05-2008 65.84 65.90584

31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599

30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878

31-07-2008 476570 67.566 15-08-2008 63.8 63.8638

31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595

30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591

31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157

30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647

31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474

31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621

28-02-2009 409339 62.97 15-03-2009 66.59 66.65659

31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598

30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738

31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666

30-06-2009 284179 67 15-07-2009 68.37 68.43837

31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877

31-08-2009 225007 68.951 15-09-2009 71.06 71.13106

30-09-2009 243977 70.47 15-10-2009 68.62 68.68862

31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826

31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588

31-01-2010 231407 65.7125 15-02-2010 63 63.063

28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259

31-03-2010 267389 61.764 15-04-2010 60.53 60.590536.1 DATA COLLECTION

The data for invoice, due date and sales in EURO is collecting form the company

The data for invoice, due date and sales in euro is collecting form the company



The spot rate get form the site of RBI

The data for future exchange rate I had assumed 10 %

DATA COLLECTION OF SALES IN EURO OF LAST TWO YEARS


Exch Rate Due Date Exch Rate Exch rate of Future 7%

30-04-2008 364117 63.0028 15-05-2008 65.84 65.886088

31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599

30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878

31-07-2008 476570 67.566 15-08-2008 63.8 63.8638

31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595

30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591

31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157

30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647

31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474

31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621

28-02-2009 409339 62.97 15-03-2009 66.59 66.65659

31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598

30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738

31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666

30-06-2009 284179 67 15-07-2009 68.37 68.43837

31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877

31-08-2009 225007 68.951 15-09-2009 71.06 71.13106

30-09-2009 243977 70.47 15-10-2009 68.62 68.68862

31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826

31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588

31-01-2010 231407 65.7125 15-02-2010 63 63.063

28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259

31-03-2010 267389 61.764 15-04-2010 60.53 60.59053









30-04-2008 364117 63.0028 15-05-2008 65.84 65.87292

31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599

30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878

31-07-2008 476570 67.566 15-08-2008 63.8 63.8638

31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595

30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591

31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157

30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647

31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474

31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621

28-02-2009 409339 62.97 15-03-2009 66.59 66.65659

31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598

30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738

31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666

30-06-2009 284179 67 15-07-2009 68.37 68.43837

31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877

31-08-2009 225007 68.951 15-09-2009 71.06 71.13106

30-09-2009 243977 70.47 15-10-2009 68.62 68.68862

31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826

31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588

31-01-2010 231407 65.7125 15-02-2010 63 63.063

28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259

31-03-2010 267389 61.764 15-04-2010 60.53 60.59053









30-04-2008 364117 63.0028 15-05-2008 65.84 65.859752

31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599

30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878

31-07-2008 476570 67.566 15-08-2008 63.8 63.8638

31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595

30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591

31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157

30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647

31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474

31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621

28-02-2009 409339 62.97 15-03-2009 66.59 66.65659

31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598

30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738

31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666

30-06-2009 284179 67 15-07-2009 68.37 68.43837

31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877

31-08-2009 225007 68.951 15-09-2009 71.06 71.13106

30-09-2009 243977 70.47 15-10-2009 68.62 68.68862

31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826

31-12-2009 221020 68.1785 15-01-201065.88

65.94588

31-01-2010 231407 65.7125 15-02-2010 63 63.063

28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259

31-03-2010 267389 61.764 15-04-2010 60.53 60.59053






DATA COLLECTION OF SALES IN USD OF LAST TWO YEARS

Invoice DateSales in

USDExch Rate Due Date

Exch Rate Exchge rate of future at 10%

30-04-2008 245619 40.0277 15-05-2008 42.400 42.4424

31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429

30-06-2008 322251 42.82 15-07-2008 43.17 43.21317

31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323

31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594

30-09-2008 299578 45.564 15-10-2008 48.43 48.47843

31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899

30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794

31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908

31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872

28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158

31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988

30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955

31-05-2009 254369 48.534 15-06-2009 47.94 47.98794

30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872

31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868

31-08-2009 137556 48.337 15-09-2009 48.57 48.61857

30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591

31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664

31-12-2009 138496 46.63 15-01-2010 45.67 45.71567

31-01-2010 141788 45.963 15-02-2010 46.38 46.42638

28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558

31-03-2010 155564 45.498 15-04-2010 44.38 44.42438

The data for invoice, due date and sales in USD is collecting form the company






Invoice Date Sales in USDExch Rate Due Date

Exch Rate Exch rate of future At 7%

30-04-2008 245619 40.0277 15-05-2008 42.400 42.430

31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429

30-06-2008 322251 42.82 15-07-2008 43.17 43.21317

31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323

31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594

30-09-2008 299578 45.564 15-10-2008 48.43 48.47843

31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899

30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794

31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908

31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872

28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158

31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988

30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955

31-05-2009 254369 48.534 15-06-2009 47.94 47.98794

30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872

31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868

31-08-2009 137556 48.337 15-09-2009 48.57 48.61857

30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591

31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664

31-12-2009 138496 46.63 15-01-2010 45.67 45.71567

31-01-2010 141788 45.963 15-02-2010 46.38 46.42638

28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558

31-03-2010 155564 45.498 15-04-2010 44.38 44.42438







Invoice Date Sales in USD Exch Rate Due Date Exch Rate At 5 %

30-04-2008 245619 40.0277 15-05-2008 42.400 42.421

31-05-2008 287305 42.1255 15-06-2008 42.9 42.943

30-06-2008 322251 42.82 15-07-2008 43.17 43.213

31-07-2008 322155 42.8365 15-08-2008 43.23 43.273

31-08-2008 245469 42.9389 15-09-2008 45.94 45.986

30-09-2008 299578 45.564 15-10-2008 48.43 48.478

31-10-2008 209077 48.6422 15-11-2008 48.99 49.039

30-11-2008 251003 49.0033 15-12-2008 47.94 47.988

31-12-2008 280184 48.6419 15-01-2009 49.08 49.129

31-01-2009 324299 48.8345 15-02-2009 48.72 48.769

28-02-2009 224429 49.2222 15-03-2009 51.58 51.632

31-03-2009 300939 51.2315 15-04-2009 49.88 49.930

30-04-2009 226303 50.0618 15-05-2009 49.55 49.600

31-05-2009 254369 48.534 15-06-2009 47.94 47.988

30-06-2009 170805 47.7736 15-07-2009 48.72 48.769

31-07-2009 192555 48.4765 15-08-2009 48.68 48.729

31-08-2009 137556 48.337 15-09-2009 48.57 48.619

30-09-2009 152118 48.4389 15-10-2009 45.91 45.956

31-10-2009 141348 46.721 15-11-2009 46.09 46.136

30-11-2009 174159 46.569 15-12-2009 46.64 46.687

31-12-2009 138496 46.63 15-01-2010 45.67 45.716

31-01-2010 141788 45.963 15-02-2010 46.38 46.426

28-02-2010 158673 46.3257 15-03-2010 45.58 45.626

31-03-2010 155564 45.498 15-04-2010 44.38 44.424







Invoice DateSales in

USDExch Rate Due Date

Exch Rate Exche rate of future At 3%

30-04-2008 245619 40.0277 15-05-2008 42.400 42.413

31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429

30-06-2008 322251 42.82 15-07-2008 43.17 43.21317

31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323

31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594

30-09-2008 299578 45.564 15-10-2008 48.43 48.47843

31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899

30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794

31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908

31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872

28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158

31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988

30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955

31-05-2009 254369 48.534 15-06-2009 47.94 47.98794

30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872

31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868

31-08-2009 137556 48.337 15-09-2009 48.57 48.61857

30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591

31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664

31-12-2009 138496 46.63 15-01-2010 45.67 45.71567

31-01-2010 141788 45.963 15-02-2010 46.38 46.42638

28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558

31-03-2010 155564 45.498 15-04-2010 44.38 44.42438






6.2 ANALYSIS

INVOICE DATE: The date at which company send the order to the customer that is in this

project last date of month.

SALES IN EURO: The total amount of sales in Euro

EXCHANGE RATE: The rate at which one currency can be transferred to another currency

that means exchange rate

RECEIVABLE: The amount of sales done on credit bases at that time bill of receivable

generated it means customer having liability to pay amount which is for the period of 15

days in this project or company

Formula: sales in euro * exchange rate

DUE DATE: The amount of receivable will going to receive actually at that day called due

date for the company

ACTUAL EXCHANGE RATE: The amount of receivable receive at exchange rate of due

date that called actual exchange rate

Formula: actual exchange rate * sales in euro

DIFFERENCE IN RUPEES WITH OUT HEDGING: Due to fluctuation the amount of

receives will differ because of exchange rate of due date so that difference called difference

in rupees without hedging.

Formula: receivable – actual

DIFFERENCE FROM HEDGING : we had hedged our position for the amount of

receivable so how much we will receive actually at due date with hedging that difference.

Formula: amount of future rate – amount of spot rate

PERCENTAGE DIFFERENCE IN WITHOUT HEDGING: The amount of difference in

receivable in terms of percentage:

Formula: amount of fluctuation * 100/ receivable of spot



PERCENTAGE DIFFERENCE IN WITH HEGDGING: The amount of difference in

receivable in terms of percentage

Formula: amount of hedging * 100/ receivable of future

ASSUMPTION OF FUTURE PRICEAT 10 PERCENT: The rate of fluctuation in both the

market I assumed form the actual study of data so I had taken different stages which is given

below, here I also include brokerage charges and as well as other taxes.

[NOTE: - The excel sheet is attached here in Annexure Please Check this excel sheet of

detail analysis]



Chapter – 7

FINDINGS



7.1 FINDINGS

Finding in two years sale Export data of ( EURO & USD sale data) at Austin

Engineering co ltd which are as under in tabular form and also mentioned in

theoretical framework

FINDINF OF EURO SALES DATA which are mention as under in table

EURO

RECEIVABL

E ACTUAL

Withou

t

hedgin

g

Hedgin

g

without

hedgin

g %

hedgin

g %

ASSU

M %

TOTA

L 581926366.2

2961278702

4

-

717487

-

571809 2.622

-

0.0984

7 10 %

TOTA

L 581926366.2

2961278702

4

-

717487

-

564619 2.622

-

0.0971

6 7 %

TOTA

L 581926366.2

2961278702

4

-

717487

-

559826 2.622

-

0.0962

9 5 %

TOTA

L 581926366.2

2961278702

4

-

717487

-

555033 2.622

-

0.0954

2 3 %

As per the data shown in the above table where company having lots of amount of

business in euro so due to exchange rate fluctuation huge amount of loss created but

if company go for the hedging of euro then it comes to minor loss at different level.

Like if there is fluctuation around 10% then percentage of difference comes 0.098

while without hedging it is 2.622,

Now if there is fluctuation around 7% then percentage of difference comes to 0.097

while without hedging it is same as above,



And at the rate of 5% and 3% it is around 0.096 and 0.095 respectively but the

percentage amount without hedging is remain same because that is the average of

two years data.

Hence, clearly visible in the table that company should go for the hedging because it

reduce the exchange rate volatility and that comes to minor difference to actual

received amount of sales.

USD

RECEIVABL

E ACTUAL

Without

hedging

Hedgin

g

without

hedging % hedging %

ASSU

M %

TOTA

L 249427804.5

251220087.

3

1792282.78

6 243208

2.21266666

7 0.09724162 10 %

TOTA

L 249427804.5

251220087.

3

1792282.78

6 103818

2.21266666

7 0.05425813 7 %

TOTA

L 249427804.5

251220087.

3

1792282.78

6 238014

2.21266666

7

0.09504037

7 5 %

TOTA

L 249427804.5

251220087.

3

1792282.78

6 235937

2.21266666

7

0.09415987

9 3 %

FINDINF OF USD SALES DATA which are mention as under in table

As per the data shown in the above table where company having lots of amount of

business in USD so due to exchange rate fluctuation huge amount of loss created but

if company go for the hedging of euro then it comes to minor loss at different level.

Like if there is fluctuation around 10% then percentage of difference comes 0.097

while without hedging it is 2.21.

Now if there is fluctuation around 7% then percentage of difference comes to 0.054

while without hedging it is same as above.

And at the rate of 5% and 3% it is around 0.095 and 0.094 respectively but the

percentage amount without hedging is remain same because that is the average of

two years data.



Hence, clearly visible in the table that company should go for the hedging because it

reduce the exchange rate volatility and that comes to minor difference to actual

received amount of sales.

Chapter – 8

SUGGESTIONS/RECOMMENDATIONS



8. SUGGESTION

Company having huge business in euro and us dollar and this kind of currency is

very volatile so just to avoid exchange rate fluctuation company should go for the

hedging in both the currency due to that it will reduce fluctuation till negligible

extend.

That helps to its working capital need and it shown financial sound company which

is very healthy sign for the company.

If company wants to go for the currency hedging then there is some formality like

they has to open on corporate dematerialised account and trading account through

company can put trade in to foreign exchange.

Management of the Company also has to work out on development of Option

Trading Strategies for hedging by using Call & Put Option as it is expected that

trading in currency options will start very soon in near future.



Bibliography

www.aec.eng.com

www.rbi.com

www.nseindia.com

Annexure

EXCEL SHEET OF DETAIL ANALYSIS


http://www.nseindia.com/

http://www.rbi.com/

http://www.aec.eng.com/

Final Report Hiren Kariya012

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