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Nov 26, 2014
A PROJECT REPORT ON
Analysis of Foreign Market Entry Strategies in Steel Industry with special reference to Tata Steel & SAILfor the Partial fulfillment for the Degree of Masters in Business Administration (Session 2009-2011) - MBA (General), 4th Sem.DCRUST, Murthal.
Under the Supervision of: Dr. Aarti (Faculty of Management deptt.) DCRUST, MURTHAL1
Submitted By: Jyoti MBA (Gen), 4th Sem 09092816
I, Jyoti, student of MBA 4th Semester, studying at Deenbandhu Chhotu Ram University of Science and Technology, Murthal, hereby declare that the project report on topic Analysis of Foreign Market Entry Strategies in Steel Industry with special reference to Tata Steel & SAIL submitted to DCRUST, Murthal in partial fulfillment of Degree of Masters of Business Administration is the original work conducted by me. The information and data given in the report is authentic to the best of my knowledge. This project report is not being submitted to any other University for award of any other Degree, Diploma and Fellowship.
JYOTI MBA 4th SEM. 09092816
ACKNOWLEDGEMENT A successful project can never be prepared by the single person to whom the project is assigned, but it also demands the help and guardianship of some conversant person who helped the undersigned actively or passively in the completion of successful project. It is my pleasure to be indebted to various people, who directly or indirectly contributed in the development of this work and who influenced my thinking, behavior, and acts during the course of study. I express my sincere gratitude to Prof. Rajbir Singh worthy Principal for providing me an opportunity to undergo project report at Foreign Market Entry Strategies. I am thankful to Dr Aarti (Guide) for his support, cooperation, and motivation provided to me during the project for constant inspiration, presence and blessings. Lastly, I would like to thank the almighty and my parents for their moral support and my friends with whom I shared my day-to-day experience and received lots of suggestions that improved my quality of work.
JYOTI MBA (GENERAL) Roll no -09092816
To Whom It May Concern
This is to certify that Ms. Jyoti has completed her Project in partial fulfillment of the requirement for the award of degree of Master of Business Administration (MBA) for session 2009-2011 under the supervision of Dr. Aarti, Faculty of Department of Management Studies, Deenbandhu Chhotu Ram University of Science and Technology, Murthal. The project was Analysis of foreign market entry strategy in steel industry with special reference to Tata Steel & SAIL. She has performed excellently on the project assigned to her and on account of that I, Dr. Satpal Singh, hereby issuing her the project completion certificate.
Authorized Signatory ( Date of approval: April 28, 2011. ) Dr.Aarti Faculty of Management Deptt. DCRUST, Murthal
Table Of Content
Chapter Chapter 1 Chapter 2 Chapter 3 Chapter 4
Particulars Introduction to Study Review of Literature Research Methodology Objective of study Industry Profile: World Steel Industry Indian Steel Industry Challenges and Opportunity Modes of Entry Company Profile Tata steel Ltd. SAIL Findings Suggestions and conclusion Limitation Bibliography
Page No. 1-2 3-7 8-9 10-26
Chapter 5 Chapter 6
Chapter 7 Chapter 8 Chapter 9
INTRODUCTION OF THE TOPICThe world steel industry recorded a high growth rate in production as well as in consumption over the past few years. The main reason is the increasing steel demand in automobile and in construction sector before the recession and in recovery. The AsiaPacific Region- especially China and India is witnessing higher production and consumption of steel. Indias economic growth is contingent upon the growth of steel industry of India. Consumption of steel is taken as the indicator of economic development. Steel industry has been moving from strength to strength. India has emerged the third largest producer of steel in the world and likely to become second largest producer of steel by 2014-15. In 2009-10, steel production was 60 million tones that is expected to double to 124 million tones by 2012. The ministry of steel projected for the next five year the demand of steel will grow at annual growth rate of 10%. There are many opportunities in world steel industry for the growth of economy. To exploit these opportunity there are many market entry strategies which a firm adopt to enter in to world steel industry. It includes- a) what market to enter? b) what is the mode of entry? While entering in foreign market we considering a particular foreign market, its economic, political-legal and cultural characteristics, Whether to do business in few or many countries, To decide in which particular market to enter, How to enter the market that is through direct exports, joint venture or direct investment, The extent to which their product, price, promotion, distribution should be adapted to individual foreign markets. Expansion into foreign markets can be achieved via the following mechanisms Exporting Licensing Joint venture Franchising 6
Turnkey Operations Wholly Owned Subsidiary Mergers & Acquisitions Strategic Alliances
There are many Public and Private Steel Companies in India like Tata Steel Ltd., SAIL, Jindal Steel and Power Ltd., Bhushan Steel Ltd. All have different foreign market entry strategies. The purpose of my study is to analyze the market entry strategies of Tata Steel Ltd. And SAIL and to find out which strategy is best to enter in foreign market.
CHAPTER-2REVIEW OF LITERATURE:How to find appropriate mode and what will be the critical factors considering choose of entry mode into foreign market? It has been an interesting topic for the researchers in area of international business study. From the result of our literature search, we have found many good academic articles and researches, and have adapted them to be more specific and suitable for investigate the select topic as following. Pan & Tse, (2000) He argued that although entry modes have been modeled into two ways: 1) model as continue increasing level from export to wholly owned subsidiaries (Chu and Anderson, 1992); 2) the comparison between one baseline mode and other modes (Agarwal and Ramaswami, 1992). The choice of entry modes also can be revealed from a hierarchical perspective: at first managers can found a multi-level entry modes hierarchy from equity to non-equity modes, then consider critical factors for each level and reach the appropriate one. This article provided us an opportunity insight the process entry mode choice. Doole and Lowe (2001) They suggest that a firms attitude and commitment to international expansion is crucial to the success of the operation. The size of a firm can also hinder or enhance international development as firms rely on the capability of staff for planning. When firms endeavour to commit to international expansion, the lack of consistent information, adaptation of the marketing mix variables and market segmentation are factors which need to be considered in detail. The host countrys government can have a proactive role to play in setting legislation and creating barriers to entry for international firms which may either support or impede a firms market entry strategy.
Eicher & Kang (2005) He examined MNCs optimal entry modes into foreign markets, they found that factors of market size, FDI fixed costs, tariffs and transport costs forms important criteria during the process of mode choice. The result highlight SMEs prefer JVs but large countries are more likely to attract acquisition. Choice of entry mode depends on many factors, here we summarize a general model for choosing entry mode from previous studies, and this model contains three parts: company variables, target market and target country environment variables. This research contributed the study emphasis for our research. Anderson and Gatignon 1986; Domke-Damonte 2000 Firms entering new foreign markets choose from a variety of different forms of entry, ranging from licensing and franchising, through exporting (directly or through independent channels), to foreign direct investment (FDI) (joint ventures, acquisitions, mergers, and wholly owned new ventures). Entry modes vary in the degree of control the firm has over invested tangible and intangible resources and the transactions costs associated with that resource commitment. From another perspective, entry involves two interdependent decisions--location and mode of control. Exporting is located domestically and is controlled administratively; foreign licensing is foreign located and is controlled contractually; and FDI is foreign located and is controlled administratively. Transaction costs theory views each choice of entry mode as an individual transaction that involves a trade-off between control and resource commitment Daniels and Bracker 1989 In terms of the performance implications of internationalization, evidence supports the idea that foreign market entry, regardless of mode, significantly increases returns on sales and assets Other research has compared relative financial performance between and within modes. For example, Tang and Yu's (1990) revenue maximization model concluded that a wholly owned subsidiary is the optimal strategy because it generates the highes economic profit and maximizes control of critical knowledge indefinitely. This conclusion was based on a mathematical model that determined transfer prices in other
entry strategies are higher than marginal costs, making subsequent operations inefficient.
Driscoll (1920) He proposed that the key characteristics of the entry modes met