STRATEGIC ORIENTATION OF HINDUSTHAN NATIONAL GLASS & INDUSTRIES LIMITED

Submitted to: Prof. A.K.Sar

Submitted by: Jayanta Chakraborty 10202200 Tushar Kanti Nayak 10202201 Swarasij Guha Roy 10202202 Ritesh Shreemal 10202220 ManasRanjan Mohapatra 10202227 Abhishek Adhikari 10202199 Anindya S Nayak 10202219

Company Overview
HNG was founded by Mr. C.K.Somany in 1946 following the commissioning of Indias first fully automated glass manufacturing plant at Rishra (near Kolkata). At present, it is the key player in Indias container glass industry with a pan India presence. It is the market leader with a share of ~55%. The company caters to industries like liquor, pharmaceuticals, beverages and processed foods among others. It is presently operating with a cumulative capacity of 3307 TPD across 6 manufacturing units. In the 5 ml - 3200 ml segment, HNGIL is the market leader. It caters to varied end users sectors like liquor, beer, pharmaceutical, beverage, processed food and cosmetic covering industry majors like HUL, Coca-Cola, Dabur, GSK, Nestle, Pepsi, Reckitt Benckiser, UB Group etc. The company also exports its products overseas to markets such as South East Asia, Middle East, Africa, Europe and North America. The companys export component though is currently small at 5% of total revenues.

Industry Information
The glass segment of Indias packaging industry is growing at the rate of approx 15% p.a. The untapped potential of the Indian market is reflected in the per capita glass consumption of glass of around 1.4 kg when compared with 10.2 kg in Japan and around 27 kg in the USA. Demand of the glass container industry is driven by growth in end user segments such as liquor, beer, pharmaceuticals, food processing and carbonated drinks. The liquor and beer industries are the major users of glass containers, accounting for around 60% of Indias glass container production, followed by pharmaceuticals 20%, food 10%, carbonated drinks 5% and remaining cosmetics & others. Demand for float glass in India has grown at a rate of 12% during the last 3 years, driven by growth in end user segments such as automobile and real estate. However, the business is still at a nascent stage in India compared to other countries like the US, the UK and China. The lack of sufficient float glass lines as compared to other countries reflects the huge untapped potential in the Indian market. The demand of float glass is likely to grow at a healthy 11-12% over the next 5 years backed by strong growth in the construction and automobile industries.

Product Information
The Company has one of the widest portfolios for the container glass ranging from 5ml to 3200ml across multi-colored bottles (Amber, Flint and Green). The products are available in over 30 countries. The company has been accredited with ISO 9000:2000 certification, ensuring stringent quality protocol and ISO 22000 for food and safety.

Technology
HNG introduced the NNPB (Narrow Neck Press and Blow) technology in 2007-2008. It is a revolutionary process that not only controls the distribution of glass inside the container but also reduces the weight of glass by 33%. HNG is the first to introduce and commercialized this technology in India. The company had invested a capital of Rs. 100 Cr.

Strategic Direction
Vision:
To create a world-class glass manufacturing plant that pursues Quality, Cost Reduction, and Productivity Improvement measures in a truly holistic manner leading to Customers, Shareholders, Employees and Suppliers Satisfaction; this integrated effort will result in the company becoming an Industry Benchmark and a role model for systems, processes and results.

Mission:
At HNG we look forward to customer satisfaction. Our main objective is to ameliorate our customers and stakeholders, and in the process strengthen the roots of our organization, so that we can emerge as the behemoth in the glass packing industry.

Values:
At HNG, we believe in the core values of people, operational excellence, innovation and integrity. It is our people that give us the gusto to move forward, keeping all the obstacles at bay. With our diligent workforce, production has become so much easy. Our operational excellence has given us the strength to lunch our product with even more confidence. We have an installed capacity of 2825 TPD and this is what distinguishes us from competitors. Innovation and integrity are two important things that drive the HNG team. These values are like assets that consolidates us in our march towards a greater future.

Macro Environmental Sectors Social

Trends 1. Increased awareness about recycling. 2. Prevention of land contamination and minimize carbon emissions to air and water. 1. Installed NNPB (Narrow Neck Press & Blow) technology. 2. Collaborations with international companies. 1. Performance linked to robust growth in the end user segment. 2. Focus on sustainable growth.

Impact on the Industry 1. Increased CSR. 2. Potential to capture larger market share. 3. New project implementation.

Opportunity/Threats Opportunity.

Technological

1. Able to produce high quality at less cost.

Opportunity.

Economical

Stimulate renewablefavoring market forces with attractive return rates. To encourage consumers to shift to latest advancements in technological products. 1. Make production cheaper and generation more efficiency.

Threat.

Political

1. Grant of funds by Govt. for R&D.

Opportunity.

Porters Five Forces Model:

Threat of entry: Item Key TOE

Brand loyalty commanded by incumbents High 1. Customers are brand loyal. 2. New players will require a lot of brand building. Economies of scale in the business High 1. Barriers to entry. 2. Change in technology. 3. High power and fuel cost. Capital requirement High 1. Setting up new manufacturing units. 2. High cost associated with

distribution channel. 3. High working capital requirement. Buyers switching cost low 1. Homogeneous products and low price difference. 1. Availability and procurement of sand for production. 1. Technological advancement is low.

Easy access to input

No

History of past retaliation

Low

Power of Suppliers:
Item # of suppliers relative to # industry players Key High POB As suppliers are more they are having less power.

Average buying volume of the industry per transaction

High(depends Power o f on plant supplier is low. capacity) High Natural resources like sand, lime stone and soda ash etc. are also used in other industry. Power of supplier is low. Can integrate backward but capital requirement is high. Power of supplier.

Suppliers do sell to other industries also

Cost (to industry players) of switching between suppliers

Low

Industry players can integrate backward into the supplier industry

Low

Suppliers cannot integrate forward into the industry

Low

Powers of Buyers:
Item #buyers relative to # of industry players Buying volume per average transaction Industry players do sell to all buyer segments Buyers can buy from multiple players Key POB

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

High Demand for container glass is directly linked to performance of end user industries. High Industry sells to all segments. It does not differentiate.

High HNG Caters to customers across segments (Like liquor, beer, food, soft drinks, pharmaceuticals etc.). Piramals maximum revenue comes from pharmaceuticals sector. Low Buyers can switch.POB is high.

Cost (to the buyers) of switching between players Buyers cannot integrate back to the industry Industry players can integrate forward

Low

End users can not integrate backwards. POB is low.

Low

Industry player cannot integrate forward. POB is low.

Threat of Substitutes:
Item Substitutability of the industrys product (availability and comparability of substitutes price/ performance) Key High TOS PET bottles & Aluminum cans are substitute of container glass. Available but not preferred.

Profitability of substitute products industry

High

Strategic Group and Segmentation Analysis:

The glass industry has three prime segments i.e. Container Glass, Float Glass and Fiber Glass. The container glass segment produces glass packaging products, such as bottles and jars. The float glass segment caters to residential and commercial construction, automobile windshield, mirrors etc. The fiber glass is further divided in to two sub industries like building insulations (Glass Wool) and textiles fibers used to reinforce plastics and other materials for the transportation, marine, and construction industries. The company focuses on container glass segment and has recently forayed into the float glass segment.

Float Glass Segment:

The Company possesses a market share of around 35% in western India and of around 20% and 18% in northern and southern India respectively. Integrated glass plant having capacity to manufacture toughened, insulated glasses for architectural and automotive application 18% raw material source within 100-150 km and 20% of the production is sold within 500 km. The company has a Pan-India presence with distribution network of 758 agents. Diversified supplier base for each raw material to reduce any business risks on account of non-supply Container Glass Segment: Liquor and beer industries are the main users of glass containers with 60% share, followed by pharmaceuticals 20%, food 10%, carbonated drinks 5%, and cosmetics & others account for the remaining Favorable demographics and rising disposable incomes drive consumption across end-user industries in India. The per capita consumption of glass in India is ~1.4kg, as against 27.5kg in US and UK and 5.9kg in China.

13, 13% 9, 9% 11, 11% Liquor Beer 52, 52% Food Pharmaceutical Others 15, 15%

Figure 1. End User Segmentation

Liquor:
Indians consume 200 mn cases of IMFL and 220mn cases country liquor. Increasing trend of social drinking, driving the sector growth at almost 13%.

Beer:
The consumption has been increasing by 15-20%.

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

Pharmaceuticals:
Increased consciousness for wellness leads to demand. Indian pharmaceutical market is expected to see a CAGR of 12-15% over the next 3 years (as per IMS research).

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

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

The Value Net:

Competitors: Cooperation among rival firms can bring about new technologies and R&D activities by which they can explore a new market through a new product which can be beneficial to the industry as a whole. Suppliers: Firms can integrate with the suppliers to develop quality products and ensure uninterrupted supply of raw materials. Customers: Firms can collaborate with the end users so as to fulfill their specifications and requirements keeping intact the industry standards and environmental norms. The company has introduced the NNPB technology to enhance light weight bottles manufacture thereby ensuring reduced per bottle cost for the customer (up to 33% of lower weight, lower transportation cost, less breakage). Complementor: Firms can synergize with the Complementor which will increase their scope of expansion. HNG has a joint venture with OMCO International NV (world's leading glass mould manufactures) for mould manufacturing facility; it also has an alliance with Siemens to leverage its technological innovation in automation and energy efficiency.

Identifying Key Success Factors

What do customers want? (Analysis of demand) Technologically advanced How do firms survive competition? (Analysis of competition) Adaptation of new Key success factors

Glass Industry (Container )

Using NNPB (Narrow Neck

products. Light weight & high quality glass. Aesthetically appealing glass container. Low cost products. Continuous availability.

technology. Diversified product portfolio. Economical pricing. Capacity expansion. Low resource consumption (water and energy).

Press & Blow) technology. Pan India presence. Brand loyalty. Highest installed capacity 2930 TPD.

Internal Analysis
RELATIONSHIP AMONG RESOURCES, CAPABILITIES & COMPETITIVE ADVANTAGE

Competitive Advantage Differentiation: Light weight container glass. Replacing gas with fuel. Low Cost & Price maker.

Strategy

Industry Key Success Factors Using NNPB (Narrow Neck Press & Blow) technology. Pan India presence. Brand loyalty. Highest installed capacity 2930 TPD.

Organizational Capabilities Strong R&D, Product development, Govt. relations, CRM

RESOURCES TANGIBLE Strong Balance Sheet with debt equity ratio 0.37. Adequate cash reserves. Highest installed plant capacity. INTANGIBLE High brand value. Latest Technology(NN PB) R&D. HUMAN Proper management of intellectual capital Effective collaboration among employees

The Industry key success factors for this industry mainly rest upon the product differentiation that requires continuous product development which is an outcome of regular technological up-gradation and lowering natural resource consumption.

The rightful integration of its resource and capabilities has enabled HNG to come up with the product differentiation competitive advantage. The regular spending on technology and R&D activities is due to strong financial backbone and the enhance employee co-operation which has lead to the development of intellectual capital within HNG.

DISTINCTIVE COMPETENCIES SHAPE THE FUNCTIONAL-LEVEL STRATEGIES THAT A COMPANY CAN PURSUE
Resources Functional Strategies Distinctive Competencies Superior: Efficiency Capabilities Quality Innovation Low Cost Value Creation Differentiation S UP PR EO RF I I OT RA B I L I T Y

Customer
Responsivenes s

FUNCTIONAL LEVEL STRATEGIES CAN BUILD RESOURCES & CAPABILITIES TO ENHANCE DISTINCTIVE COMPETENCIES

HNG functional strategies have lead to the attainment of its competitive advantage with value creation to gain superior profitability. Superior Efficiency: Superior efficiency has been achieved by the strategic global alliances and acquisitions, technological innovations in automation and energy efficiency and above all consolidation of resources and capabilities. Over the years HNG has spent massively on technological development lead to its economies of scale in the current development scenario. HNG has a long term customer relationship which has helped to decrease the total fixed cost and average per unit cost of sale. Customer Loyalty has been a driving force in HNGs superior efficiency. Superior Quality: At HNG quality has never been compromised. Better quality means less rework, fewer mistakes, fewer delays and better use of time and materials and that leads to cost reduction. The Company has one of the widest portfolios for the container glass ranging from 5ml to 3200ml across multi-colored bottles (Amber, Flint and Green). The products are available in over 30 countries. The company has been accredited with ISO 9000:2000 certification, ensuring stringent quality protocol and ISO 22000 for food and safety. HNG is a public limited company too. Superior Innovation: HNG is collaborating with noted international companies, such as Emhart Glass (U.S), HEYE Glass (Germany), Pennekemp (Germany), Horn Glass (Germany) and Zippe (Germany).

Emhart is the world's leading supplier of equipment, controls and parts to the glass container industry which is providing HNG with the latest glass bottle forming machines. It is also supplying state-of the-art BIS machines to be installed for the first time in Asia. HNG is also using NNPB technology resulting in 33% reduction in weight of glass container.

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

sizes, of different colors, and with frosted finish. This has enhanced glass aesthetics, compared to PET and Tetra pack. HNG is focusing more on narrow neck press and blow process (NNPB) to enhance lightweight bottles manufacture. This has ensured higher per tonne realization, while reducing the per bottle cost for the customer (up to 33% lower weight, lower transport cost, less breakage). Presently HNG has a market share of 55%.

VALUE CHAIN FOR HNG

Firm Strong Financial Position, Accounting, Global Alliances, Low D/E Ratio Infrastructure HR Technology Development Young Managers, Attractive incentives, Periodical Training Latest technology (NNPB). Fuel based to gas based. Waste heat recovery project sites for power generation.

SUPPORT ACTIVITIES

Procurement

Sourcing equipment from 100% owned subsidiary.

Sourcing Amber sand

Importing latest glass bottle forming machines

Use of cullet. Focus on automation for cost reduction

Strong distribution channel supplying direct to end users.

Direct Marketing Website

Customer specific. Prompt customer feedback model

PRIMARY ACTIVITIES

Inbound Logistics

Operations Outbound Marketing & Services Logistics Sales

All the above factors have come together for HNG to create its competitive advantage thus helping it to maintain profitability over the years and serve the customers as per their needs. Thus a margin is being Logistics generated with the integration of support and primary activities entitling HNG to create a barrier for other players.

ASSESSING RESOURCES AND CAPABILITIES OF HNG

ASSESSING RESOURCES OF HNG ON SCALE OF 1-10

Resource

Importance

HNGs Relative Strength

Comment

R1. Finance R2. Technology R3. Plant and Equipment

9 10 9

9 9 9

Rating AA+ & PR1+ by CARE Ratings. Low Debt Equity Ratio(0.37) Leader in NNPB (Narrow Neck Press & Blow) Importing latest glass bottle forming machines. Highest & constant capacity addition. Direct marketing. High brand loyalty (50% market share). Participated in national and
international trade fairs in order to enhance brand visibility.

R4. Distribution R5. Brands

7 7

8 7

The key Resources are Finance, technology, updated equipment and a wide distribution network. These factors integrate to form a part of the competitive advantage strategy. The resources are well determined by the key success factors for the industry.

ASSESSING CAPABILITIESS OF HNG ON SCALE OF 1-10

HNGs Relative Strength 9

Capability C1. Product Development C2. Manufacturing C3. Financial Management C4. R&D

Importance 9

Comment It is very strong in product development as compared to competitors. High plant capacity thereby enjoys economies of scale/scope. Debt equity ratio 0.37. Sufficient cash reserves. Loaned funds of Rs. 640 Cr. Spending for gaining operational efficiency. Total expenditure Rs. 13lacs in FY11. Direct Marketing. Participated in
national and international trade fairs in order to enhance brand visibility.

8 10

7 9

C5. Marketing and Sales C6. Government Relations

9 4

8 6

Important in emerging markets.

Only resources alone cant provide a platform for implementing on competitive advantage. The resources need to be applied with the capabilities to form a part of the strategy. The industry key success factors induce the capabilities to work upon to build the competitive advantage for the company. HNG has a strong relation with the State Govt. of different states. Continuous product development becomes very important.

APPRAISING RESOURCES AND CAPABILITIES OF HNG 10 C1 R4 C2 TIVE STRENGTH R5 C6 5 R1 R3 C5

Superfluous strengths

Key strengths

R2 C3

C4

The resources and capabilities are being assessed so as to find out which resources and capabilities are important and in which HNG has relative strength. The factors in which HNG has relative strength will help it to charge a premium on the price of services it provides. The strength determines the resources and capabilities in which economies of scale can be achieved. HNG is a leader in technological innovation and also backed up by good financial condition and a wide distribution network. Government regulations need to be improved so that the company can undertake in-house R&D activities.

The Delta Model

At HNG three distinct strategies are followed: 1. Strategic Priority 1: Grow value of the HNG brand and widen the product portfolio. 2. Strategic priority 2: Transform the go-to market model to improve efficiency and effectiveness. 3. Strategic priority 3: Attract, develop and retain a highly talented and diverse workforce. The three distinct strategic options are: Systems lock-in Total customer solutions Best products Systems Lock-In: The company enjoys economies of scale due to highest installed capacity (2930 TPD) and several proposed greenfield and brownfield projects across India. The company is the countrys largest container glass manufacturer with a commanding market share of 55% .The Company has focused on both organic and inorganic growth. The Company has successful turnaround six sick units over a period of time. The Company has synergized with the Complementor to increase their scope of expansion. HNG has a joint venture with OMCO International NV (world's leading glass mould manufactures) for mould manufacturing facility; it also has an alliance with Siemens to leverage its technological innovation in automation and energy efficiency.

Total Customer Solutions:

The Company has one of the widest product portfolios ranging from 5ml to 3200ml across multi-colored bottles. Furthermore the companys products are available in over 30 countries. The Indian container glass market is estimated to be a Rs. 30-billion business, accounting for 12% of the packaging industry and is expected to grow at 10% to 12% per annum in the future. India's is one of the lowest per capita glass container consumption at 1.4 kg as compared to 27.5 kg in the USA and 10.5 kg in Japan. Demand for container glass is driven by the growth in user industry i.e. liquor, beer, pharmaceuticals, cosmetics, perfumery, food and beverages. The liquor and beer industries are the main users of container glass with 70% contribution, followed by pharmaceuticals 10%, food products 10%, beverages 6% and cosmetics 4%. Business in this industry also differs from one region to another. It has a prompt feedback customer model. The Company has an in house fleet of over 100trucks to derisk supply side logistics. The Company has a team of highly experienced and competent management to cater to varied customer demand.

Best Products:
HNG has the highest plant capacity which enables to enjoy economies of scale thereby lowering the cost of products. The Company specializes in light weight container glass (by using NNPB technology) across three colors such as Amber, Flint and Green and also with frosted finish. This has enhanced glass aesthetics, compared to PET and Tetra Pack.

Value Proposition:
Value Proposition Element Experiences Description Value Delivery Systems

Value Appropriation

Integrated teams of skilled professionals with deep understanding of client's business. End to end delivery with high quality and competitive price. Installed a value score card system in collaboration with Ernst & Young. Training of professionals (Young Managers Programme for selecting potential managers). Setting up of an HR strategy cell. Value gained by customer: Light weight container glass. Different shapes and sized bottles. Value gained by HNG: Leveraging long term relationships with clients and servicing their growth needs. Value shared by both: Lower resource consumption (Energy & water), conversion of fuel based units to gas based to reduce carbon emission.