Jindal Steel & Power Limited
Jindal Steel & Power Limited, part of the Jindal Organization, is one of the important steel producers of the country. Founded at Hisar, Haryana by industrialist O P Jindal, it is currently the third largest producer in India in terms of tonnage. It manufactures sponge iron, iron ore etc. as well as active in power generation. With revenue of about $1363.5 million last year, the company employs more than 15000 people throughout the world. The company has its headquarters in New Delhi and is presently headed and managed by Naveen Jindal, son of late O P Jindal. (www.datamonitor.com)
Decision making and analysis
In the contemporary scenario, the success or breakdown of the business is closely associated with the class of decision making. Decision making at Jindal steel and power takes place at three levels –
* Corporate level: The decisions here generally concentrate on company’s core competence, backward and forward integration, competitive advantages and manpower retention by employee empowerment.
* Middle management: The decisions concern realization of goals set by the top management and to monitor the progress and make any mid course correction.
* Operational management: Decisions related to product quality, delivery and after sales service to ensure customer satisfaction at all levels (internal as well as external).
Cyclic industries like iron ore, steel or power are very susceptible to changes in government policies or in terms of availing new opportunities. Jindal management is in tune with such highly efficient strategic decision making. One such strategic decision taken by Jindal Steel and Power ltd. is discussed herein-
“Jindal Steel and Power Limited has entered into a strategic alliance with Hydro Power development corporation of Arunachal Pradesh and the state government, to set up Subansiri Middle, a 1600 MW hydro electric power plant there (Asia Pulse, November 25,2009)”. The decision is considered strategic because-
* This project will make them big enough in hydro electric power generation to eliminate any competition
* There is a tremendous gap between supply and demand of power in India; this project will ensure returns which will never be affected adversely by any downturn in economy or political changes in the country.
* Involves high degree of uncertainty and risk
* Involves huge capital investment in the form of fixed assets and infrastructure
Thus such decision is taken after undertaking extensive research and information analysis. Some of the important areas of research or information required before taking the decision are-
* Information on the available alternatives to the decision; a critical and thorough analysis of the alternatives is required as huge investments are involved
* Facts and information about the benefits or services being provided by the concerned state government like tax holidays, subsidies, land etc. (Arunachal Pradesh state government provides various incentives like Sales tax/VAT exemption up to 99% or low predetermined lease rents of land, (www.arunachalpradesh.nic.in).
* Local and national competitors in Arunachal Pradesh, as well as analysis of the target areas
* Information on availability of raw materials, labor supply and transportation facilities in the state of Arunachal Pradesh; as well as the legal and operational costs involved in the setting up of the plant
A tactical decision taken by Jindal steel and power management is “declaring a dividend of 550% for the shareholders”. The decision was taken after the company reported more than two-fold growth in consolidated net profits (www.jindalsteelpower.com). The decision taken here is tactical as-
* It is medium term; dividends for one fiscal year
* the decision is not very frequent or repetitive
* the company will build brand loyalty and retain loyal stakeholders
* Quantitative information is available about company’s financials
Although these decisions are less risk prone and have medium term effects, still they need to be taken after thoroughly analyzing the available information. Information required by the Jindal management before declaring dividends is discussed below –
* Complete information about the company’s financial performance and reports
* Understanding of the company’s financial ratios to maintain a balanced financial leverage and favorable debt-equity ratio
* Information on the other viable alternatives where the profits could be invested, if dividends are not to be declared
* Competitor dividend policies – whether dividends are declared by rival companies in that particular quarter
The bottom line of Jindal group depends on the decisions taken at operational levels. The guiding principles of decision making are waste management, quality management, delivery management in the most cost effective way.
Jindal steel and power decided to hire another local transport company for the purpose of delivery of their raw materials from the market to logistics/ factory unit or goods from factory to market. The decision here is regarded as operational due to the reasons mentioned below-
* The decision involved here is immediate and involves lower costs
* Is for a short period of time
* Has limited scope for decision
* The decision is repetitive and susceptible to frequent changes
Such decisions are often based on computerized data, experience of the managers or locally available information. Some information requirements are –
* Information about the cost and time benefits/losses associated with the decision
* Comparative analysis of the available options (transport companies in this case)
Information on strategic and tactical moves of competitors plays crucial role in survival or death of an organization. Jindal Steel and Power limited is no exception to this. At Jindal, management is aware of its competition and does whatever it takes to keep ahead of the competitors. The main competitors of Jindal Steel and Power limited are –
* Steel Authority Of India Limited
* Tata Steel
* Tata Power
* MSP Steel and Power limited
Some cases or situations where information on competitor’s decisions and policies may prove or proved quite useful are discussed below –
Recently, when Steel Authority of India Limited entered into an exclusive agreement with the Indian Railways for supplying products, Jindal Steel and Power aware of the decision and the consequences, filed a case with the Competition Commission of India against Indian Railways on the basis that the exclusive agreement would threaten the likelihood of competitors contending for the projects through competitive bids (Business Standard, November 9, 2009).
In another instance, Jindal steel and power ltd. being aware of the fact that the demand for galvanized iron and steel is quite high in many areas of north India, have themselves planned to launch something on the lines of galvanized steel launched by Tata steel in July 2009 (India Business Insight, November 2009). Having information about the decision of Tata steel to launch a new form of galvanized steel will prove quite beneficial to Jindal steel as they can launch a better product than the competitors and thus ensure that there is no loss or damage to their market share for the product in North India.
In a similar situation, information on MSP steel and power’s expansion plans in Chhattisgarh (www.myiris.com) is of utmost relevance to Jindal Steel and Power as it has a considerable market share in Chhattisgarh and MSP steel and power’s expansion there might affect Jindal’s business and market share. Thus JSPL can take certain decisions and change/develop plans for their own expansion to make sure that there is no effect on their market share and they have a competitive edge over their competitors.
Another instance where knowledge about competitor’s decisions and information proved quite beneficial to JSPL is regarding the setting up of a power plant in Arunachal Pradesh. Jindal Steel and Power, knowing about the plan of Reliance power to set up 1000 MW hydro electric power plant in Arunachal Pradesh (India Business Insight, 2009), formulated its own strategies and decisions accordingly, and decided to set up a hydro electric power plant with more power generation capacity before the establishment of Reliance Power’s plant there.
B2B Commerce & Jindal Steel and Power
Whatever the size of the business may be, B2B e-commerce undoubtedly adds value to its operations. Jindal group has kept itself abreast with the latest technology and launched a B2B portal Steelmart.com for the steel sector. It has formed alliances with various service providers like Indiaport.com and many others to provide a perfect environment for choosing and selecting new business associates for carrying out the transactions, not only for the companies under the Jindal group but the other firms in the steel sector as well. However in context of Jindal Steel and power, through this initiative, Jindal group intends to provide Jindal steel and power with an easy access to market functionaries: producers, distributors, suppliers etc and an electronic marketplace solution (Business Line, September 2000). This enables JSPL to ensure a continuous availability of raw materials whenever required to improve the efficiency level of operations and supply/distribution channels.
B2B without any question offers variety of information on products, suppliers, product time and lead time, competitors, market share etc. and therefore besides the portal, Jindal management has developed an extensive system of B2B commerce or in other words, an online system providing suppliers all over the country the facility to register with the Jindal group and supply raw materials and other resources as and when required by the company. Jindal group already has a well established Enterprise Resource Planning and SAP mechanism, and B2B is just another leap forward to become more cost effective and competitive. Looking at the pace with which Jindal Steel and Power has rose to a position of eminence in the steel and energy industry, B2B holds even more importance for the company in the future and has very high future potential.
Jindal Steel and Power limited can be thus seen as a highly efficient and competitive company, in tune with the latest aspects of the technology and development, possessing at the same time, the wide experience and knowledge of an equally effective and efficient management team. The company is a live example of excellence and perfectionism involving highly competent decision making, planning and execution of the strategies.
* India’s Jindal to setup 1600 MW power plant in Arunachal (2009). Asia Pulse (Internet), 25 November. Available from < http://www.asiapulse.com/> Accessed 24th November 2009
* Arunachal Pradesh State Industrial Policy (2008), Department of Industries, Government of Arunachal Pradesh (Internet). Available from <http://www.arunachalpradesh.nic.in> Accessed 24th November 2009
* Jindal Steel net up 2 fold; announces 550% dividend (2009) Press Trust of India (Internet) 27 May. Available from <http://www.jindalsteelpower.com/media/news.aspx> Accessed 24th November 2009
* Press Trust of India (2009) JSPL files complaint against railways with CCI. Business Standard (Internet) 9 November. Available from <http://www.businessstandard.com> Accessed 25th November 2009
* Tata launches Galvanized Steel brand (2009). India Business Insight (Internet) 13 July. Available from < http://ibid.informindia.co.in> Accessed 25th November 2009
* Company Profile ‘Jindal Steel and Power limited’ (2008). Available from <www.datamonitor.com> Accessed 24th November 2009
* IRIS Business Service (2008) MSP Steel announces expansion plans (Internet) 13 August. Available from <http://www.myiris.com/indexserver/storyimage/2008/08/13/2008_287435_1.png> Accessed 25th November 2009
* Reliance Power to set up a hydroelectric power plant in Arunachal Pradesh (2009). India Business Insight (Internet) 30 September. Available from <http://ibid.informindia.co.in> Accessed 25th November 2009
* The Hindu Bureau (2000) O P Jindal group launches portal for steel sector (Internet) 30 September. Available from <http://www.thehindubusinessline.com> Accessed 26th November 2009