Shiv Industries: Facing the

challenge of globalization

 Shiv Industries, an 100 crore corporate, based in

Raipur was facing a tough market in the year 2000.
 Background:
 Shiv was part of established business conglomerate of India.
 Focused on automabile industry and other 4- 4-wheeler vehicle
segments for its business.
 It also had presence in automotive replacement market
 In moulded rubber industry Shiv had a high equity.
 Major concerns was it was facing tough competition, from both
the high-
high-tech as well as the low
low--tech product markets.
Ôhe changing competitive scenario-
scenario-
Ôrends in global auto-
auto-industry

 Fundamental changes in the industry were influenced by scale

economies, OEM strategies, new technology, globalization and
assorted business.
 According to ICRA-
ICRA-to remain competitive the auto component
suppliers would be required to be capable of:
 Providing OEMs with integrated systems rather than mere
components.
 Participating in the automotive supply chain globally.
 Raising quality to much higher levels.
 Seeking higher margins and revenues through increased participation
in the replacement market.
 Monitoring and absorbing a greater share of product warranty costs.
Ôhe Revolution within ² Ôrends in
automotive component industry

 Ôhe automotive components secter was in the midst of

its third revolution in last 12 years.
 1st revolution:
 Vehicle manufacturers used the µLopez¶ concept of Reine
Preisdiktak ( Price as the only criterion).
 About 175 controlled almost 80% of the value of the total
supplied parts.
 2nd revolution:
 led to the growth of the mega suppliers, who specialized in
specific areas of supply.
 3rd revolution :
 globalisation
about Shiv

 Ôhe Shiv group was one of the largest industrial groups in India
 Established in 1900s
 It consisted of over 20 companies
 Ôurnover of US$ 1billion and a workforce of 37,000 people.
 Diversified into tea, auto parts, electronics, finance,
pharmaceuticals etc.,
 Emphasis on quality, service, reliability and ethics.
 Steadfastly ensured control over the management of its
companies in spite of various foreign collaborations and significant
external investments.
J ternal environment (as relevant
for shiv)
 Primary focus ± passenger car and other four wheeler vehicle
segments.
 International players who were bringing in their alliances in the
auto ancillary industry were rapidly replacing indigenous vehicle
manufacturers.
 Foreign auto manufacturers had relatively stricter quality issues
and perceived an advantage in dealing with their existing
international tie-
tie-ups.
 Ôhere existed a large segment controlled by counterfeit or
duplicate products.
 Shiv¶s share in the replacement market was small and was
skewed towards the central India.( limited distribution network,
high prices and smaller portfolio of products)
 Some efforts had been made at shiv in establishing retailing
operations for moulded rubber parts but with limited success.
Ôhe Internal organisation at shiv

 [uman Resource:
 Key strength-
strength-highly conscientious, relatively stable and reliable
management .
 Senior management staff were perceived to be more involved
in achievement of the completion of specific tasks rather than
driving the overall business objectives of their functional areas.
 Lacked aggressive attitude.
 Management style:
 Systematic analysis of non compliance was not executed.
 Lack of accountabilities were not well established.
 Excessive focus on systems and processes without much
appreciation of their impact on business objectives.
xonsultants suggestions

 Ôie up with a foreign principal and form a joint venture for high
value items for both domestic and international markets.
 Go alone without a tie-
tie-up and reconcile to being a Ôier
Ôier-- II or Ôier-
Ôier-
III player in the domestic market in the medium to long term.
 Develop an in house R&D capability to develop high-
high-end products
in the long run for both domestic and international markets.
 Significantly increase presence in the replacement market.
 Look at the opportunity of being a supplier of low-
low-end auto
components in the international market
ur suggestions

 Relocate the plants close to the markets in India.

 Concentrate on the business of auto components.
 Export auto components to Asia and Africa.
 Make a surgery to senior management.
 Ôry to capitalize on rubber technology.
 Marketing is essential to compete with the rivals.
 Ôry to develop in-
in-house R&D in collaboration with
renowned research institute.
 Emphasize on ³being the best-
best-cost provider´.
 Relationship marketing