2

DECLARATION

I, ANANDKUMAR TIWARI, hereby declare that the report on “BHUSHAN POWER AND

STEEL Ltd” entitled “DISTRIBUTION CHANNEL” is a result of my own work and my

indebtedness to other work publications. Correction if any will be duly acknowledged.

Place: NOIDA

Date: 17th June 2013 Anand Kumar Tiwari

3

CERTIFICATE OF AUTHENTICITY

This is to certify that the project work titled DISTRIBUTION CHANNEL submitted to

Bharathiar University in partial fulfilment of the requirements for the award of the Degree of

Master of Business Administration in is a record of the original work done by ANANDKUMAR

TIWARI under my supervision and guidance and that this project work has not formed the basis

for the award of any Degree/Diploma/Associate ship/Fellowship or similar title to any

candidate of any University.

Signature of the Guide

SACHIN ROHTAGI

Submitted for University Examination held on ________________________

Internal Examiner External Examiner

4

PREFACE

As MBA students our aim should not be only to learn theoretical concepts in the classroom, but

it becomes more important as how we apply those concepts in practices.

In present scenario the world is developing so fast, and thus the technological and application

theory is changing at a greater phase. The study inculcates students to think out of the box,

rather than emphasising within the box. We are coming across many modern theories and

implementation of machineries, to start new business. We must have the knowledge of theories

and practical, through it, the student can able to know about how to apply their mind in the real

business world.

This training is to create awareness about the industrial environment amongst the students. Such

Industrial visit also plays vital role in MBA programme.

The importance of industrial training and project preparation has been widely accepted in the

education institutions. Thus knowing the importance of such practical visit, our college is

providing with such a programme to enhance the overall development of the students.

“BHUSHAN POWER AND STEEL Ltd” gave me the golden opportunity to carry out my

training in such a great organization. I have prepared the detail report regarding the

“DISTRIBUTION CHANNEL”. I have tried my best to collect all necessary information

relating to the project work.

5

ACKNOWLEDGEMENT

It gives me great pleasure to present the report entitled “DISTRIBUTION CHANNEL” at

BPSL, SAMBHALPUR.”

First of all, with profound pleasure and proud privilege, I take this opportunity to express my

deep sense of gratitude and indebtness to the Bhushan Power and Steel Ltd. Sambhalpur, for

giving me opportunity to undertake this project.

I would like to express my sincere gratitude to Sh. P.N. MAHESHWARI (DGM Marketing).

For giving me this opportunity to complete my internship in this esteemed organization and for

their kind supports.

I would also like to thank Mr. TARUN GUPTA (Senior Manager Marketing) and

Mr. ARVIND DUBEY (Executive Marketing) for his guidance throughout the project.

With great sense of gratitude, I also thank him for his experienced judgment, endless interest

and constant encouragement with out which it would have been possible for me to accomplish

the project successfully.

There is a saying “hundred miles journey begins with one step” it was my first step in the

industry so that with immense gratitude and heartful appreciation.

I am greatful to MS. SEEMA MISHRA (Asst. Dean IIBS) for providing esteemed guidance

and valuable support throughout the project.

I find my self- lacking in word to express sense of gratitude to my beloved parents for their

encouragement, moral and emotional support.

6

OBJECTIVE OF STUDY:

Management is a course which teaches the student to get the work done properly from different

available sources viz. man, machine, material, money etc. So there can be a satisfaction from

the organization side and the workers side who play a significant role in achieving success. So

far the fulfilment or the management course, it gives emphasis to project work and students

learn how to plan in practical terms rather in terms of theory only. Student tends to develop

analytical and problem solving skill. We necessary become motivated and competitive, in fact

all the learning that goes on for the two year term become so much the part of our thinking that

we developed a well all rounded personality.

The following are the objectives and purpose of the study-

I. For the fulfilment of Master of Business Administration (M.B.A) programme as realized

by the International Institute of Business Management. (AICTE approved)

II. To care and contact with the working of an organization and to see the different types

of marketing activities. The main emphasis is on the distribution Channel aspect of the

organization.

III. Whatever the subject taught in the class room of MBA course that is completely

theoretical. So during the training period we compare how the marketing research

(sales) activities (practical) of our organization with the theories.

IV. Find the depth and width of distribution channel adopted by Bhushan Power and Steels

Ltd. Sambhalpur and compare them with those followed by competitors.

7

SCOPE OF STUDY

The main scope of this study is to ascertain the effectiveness of channel of distribution and

various methods to increase the sales volume of the concern. The methods include regular

information to the buyers creating a brand position in the market and taking measures to make

the brand remain in its position. One of the important aspects of this study is also to increase

the market segment for the product.

8

TABLE OF CONTENT

Chapter 1. Executive Summary

1.1 About the Steel industry

1.2 Industry trend

1.3 Indian and Global perspective

1.4 Indian Steel Industry structure

1.5 PEST Analysis

1.6 Competitor Analysis

1.7 SWOT Analysis

1.8 BPSL at glance

Chapter 2. Distribution Channel

2.1 What is Distribution?

2.2 Types of Distribution

2.3 Distribution Channel at BPSL

2.4 Type of Channel Intermediaries

2.5 Distribution Network of BPSL

2.6 Marketing Management hierarchy

2.7 Design and Engineering

2.8 Marketing Activities

Chapter 3. Research Methodology

Chapter 4. SWOT

Chapter 5. Recommendations

Chapter 6. Conclusion

Chapter 7. Questionnaire

Chapter 8. References

9

EXECUTIVE SUMMARY

The report consists of the details on BHUSHAN POWER AND STEEL Ltd. It is one of the

most effluent company’s of India for Steel Products. The main aim of it is the welfare of the

society by providing quality Steel to its consumers and service to nation. This report also

contains the detailed information about the rise in production of Steel. The Steel industry has

being studied in detail, so that that can be converted into information which can be used by

Bhushan Power and Steel Ltd for strategising its marketing distribution and channel areas.

It has various Product, such as flat product and long product. BPSL’s Indian manufacturing

units are located at Chandigarh, Derabassi, Kolkata and Orissa. Overseas manufacturing units

are located at Nigeria, Ethiopia, Sudan and Nepal with service centres at Ghana, Benin, Kenya

and Senegal

This report is detailed in nature and contains vital data of the Distribution Channel at Bhushan

Power and Steel Ltd. This report will help BPSL to make strategies for their long term objective.

This will enable the company to take appropriate decision as needed to increase as well as to

enhance the distribution channel system and further development needed in accordance with

changing business scenario. The data has been analyzed by presenting it in the form of graphs

and tables and based on it; the interpretations have been made for the same. The results and

findings have also been made for the organization to help management in their decisions. Lastly,

the recommendations have also been made for the organization.

10

ABOUT STEEL INDUSTRY

Introduction:

Steel is essential to the modern world, and its use is critical in enabling man to move towards a

sustainable future. Whether in lighter, more efficient vehicles or renewable energy generation,

steel is a fundamental part of a greener world. India’s Steel Industry has a history of more than

a century. Before the liberalization, the Indian steel industry was a predominantly synchronized

one with the public sector industry. Tata Steel was the only major private player involved in the

production of steel. SAIL and Tata Steel have been the major steel industries of India. The

liberalization of the India economy directed to the opening up of many steel industries,

consequently, increased production capacity. Since 1990, a huge investment has been made into

the industry. From 1997 to 2001 when the overall global steel industry was facing a depression,

Indian Steel Industry also went through a rough phase but improved after 2002. India has now

emerged as one of the largest producers of steel in the entire world. Almost all varieties of steel

are now being produced in the country. India has also emerged as a net exporter of steel and

Indian steel is being increasingly accepted in the global market.

1. Industry trends: Indian and Global perspectives, recent happenings.

Steel is the back bone of human civilization, it is very crucial in development of a modern

economy. The per capita consumption of steel shows the living standard of people in any

country.

Global Perspective: The industry directly employs about more than two million people

worldwide, with a further two million contractors and four million people in the supporting

industries. Considering steel’s position as the key product supplier to industries such as

automotive, construction, transport, power and machine goods, and using a multiplier of 25:1,

the steel industry is at the source of employment for more than 50 million people.

11

World crude steel production has increased from 851 mega tonnes (Mt) in 2001 to 1,527 Mt in

2011. (It was 28.3 Mt in 1900).World average steel use per capita has steadily increased from

150 kg in 2001 to 215 kg in 2011. India, Brazil, South Korea and Turkey have all entered the

top 10 steel producers list in the last 40 years.

World Steel in Figures 2012:

The World Steel Association (world steel) has published the 2012 edition of World Steel in

Figures.

World Steel in Figures provides essential facts and statistics about the global steel industry. The

book contains comprehensive information on crude steel production, apparent steel use, pig

iron production, steel trade, iron ore production and trade, and scrap trade.

Table 1: Major steel-producing countries

2011 2012

Sr. No Country MT Country MT

China 683.9 China 716.5

s Japan 107.6 Japan 107.2

United States 88.4 United States 88.7

India 71.3 India 77.6

Russia 68.9 Russia 70.4

Sources: World Steel Association

12

Graphical Representation of Global Steel Production:

67%

10%

9%

7%7%

Global Steel Production - Market Share (2011)

China

Japan

United States

India

Russia

68%

10%

8%

7%7%

Global Steel Production - Market Share (2012)

China

Japan

United States

India

Russia

13

Indian Perspective:

At the time of independence, India had a small Iron and Steel industry with production of about

a Million tonnes (mt). In due course, the government was mainly focusing on developing basic

steel industry, where crude steel constituted a major part of the total steel production.

Many public sector units were established and thus public sector had a dominant share in the

steel production till early 1990s. Mostly private players were in downstream production, which

was mainly producing finished steel using crude steel products. Capacity ceiling measures were

introduced. Basically, the steel industry was developing under the controlled regime, which

established public sector steel companies in various segments. Till the early 1990s, when

economic liberalization reforms were introduced, the steel industry continued to be under the

control of Indian regulation were constituted such as large plant capacities were reserved only

for public sector under capacity control measures; price regulation; for additional capacity

creation producers had to take license from the government; foreign investment was restricted;

and there were restrictions on imports as well as exports. But after liberalization many reforms

and regulation were changed which brought the new era for development in steel industry.

Some of the major developments were:

1. Large plant capacities that were reserved for public sector were removed;

2. Export restrictions were eliminated;

3. Import tariffs were reduced from 100 percent to 5 percent;

4. Decontrol of domestic steel prices;

5. Foreign investments was encouraged, and the steel industry was part of the high priority

industry for foreign investments implying automatic foreign equity participation up to 100

percent; and

6. System of freight ceiling was introduced in place of freight equalization scheme. Due to this,

the domestic steel industry has since then, become market oriented and integrated with the

global steel industry. This has helped private players to expand their operations and bring in

new cost effective technologies to improve competitiveness not only in the domestic but also

in the global market.

14

The Indian steel industry comprises of the producers of finished steel, semi-finished steel,

stainless steel and pig iron. Indian steel industry, having participation from both public sector

and private sector enterprises, is one of the fastest growing markets for steel and is also

increasingly looking towards exports as driving the growth of the industry.

1. Indian steel Industry Structure:

Indian iron and steel industry can be divided into two main sectors: Public sector and Private

sector. Further on routes of production it can be classified as: Integrated producer which convert

iron ore into steel e.g. SAIL, TISCO, etc and Secondary producer which make steel from sponge

iron or scrap e.g. ISPAT Industries, Essar.

2. PEST Analysis

Political Factors:

It includes a lot of policies given by the Indian steel ministry; it includes industrial policies,

electricity policies, national mineral policies, foreign trade policies, environmental policies, etc.

there are also other factors including government ownership at local and national levels and

other legislations and licenses involved.

The Government has approved the National Steel Policy (NSP) in November 2005.The long-

term goal of the NSP is for India to have a modern and efficient steel industry of world

standards. The focus of the policy is to achieve global competitiveness not only in terms of cost,

quality and product-mix but also in terms of global benchmarks of efficiency and productivity.

The policy targets to increase steel production at a compounded annual growth rate of 7.3% to

110 mt by 2019-2020. It projects domestic consumption to grow at annual growth rate of 6.9%

to 90 mt during this period. The policy envisages the share of exports to increase to 25% from

present share of 10%

100% FDI is allowed under the automatic route for metallurgy and processing of all metals.

Economic Factors:

Inflation: the inflation has grown to about 7.25 percent so there is rise in price of all the goods,

and also production efficiency has decreased.

15

Currency fluctuation and exchange rates: With increase in the value of dollar, the industry needs

to give a large amount in exchange rates. Moreover there is a rise in price of crude oil and has

cost transportation charges to increase

Economic Crisis: due to economic crisis in Europe led to decrease in demand of finished goods

in the foreign market and has led to a trade deficit.

Consumer expenditure: Due to high inflation rate the prices of product has increased leading to

more expenditure of the customer.

Social Factors: shift in value and culture of people, a positive attitude towards work, green

environment issue, product safety issue, employment and safety laws

Technological Factors: There is a need for new government investment policies. New patents

and products for extracting ores, manufacturing purpose should be implemented where ever

necessary to rapid the pace and improve quality of the products. The current level of investment

in R&D in the Indian Steel Plants is less than 0.24% of their total turnover. In order to encourage

R&D activities in Iron and Steel sector, Ministry of Steel is providing financial assistance.

3. Competitor Analysis:

The Major competitors to steel industry are plastic industry, aluminium industry and cement

industry. Though their cheap prices they cannot replace steel in essential products like

automobile, machineries and in construction of bridges and other infrastructure. Although a

small sector of steel is affected by plastic industry as steel is replaced by plastic in some

kitchenware articles, and furniture’s.

4. SWOT Analysis

Strengths-

Availability of iron ore and coal:

India has abundance of iron ore, coal & other raw materials required for iron & steel making.

It has 4th largest iron ore reserves (13 bn tons) in the world.

16

Low labour wage rates:

India has low unit labour cost, this gets reflected in low cost of production

Abundance of quality manpower:

It has 3rd largest pool of technical Manpower, next to United States and erstwhile USSR,

capable of understanding and assimilating new technologies.

Weakness-

Unscientific mining:

India is deficient in raw materials required by the steel industry. Iron ore deposits are finite and

there are problems in mining sufficient amounts of it. India's hard coal deposits are of low

quality

Low productivity:

According to an estimate crude steel output at the biggest Indian steel maker is roughly 150

tonnes per worker per year, whereas in Western Europe the figure is around 600 tonnes.

Power shortages:

Steel production in India is also hampered by power shortages.

Inadequate infrastructure:

Insufficient freight capacity and transport infrastructure hamper the growth of Indian steel

industry

Low R&D investments:

There are inadequate investments in infrastructure.

Lack of best quality and trained professionals has been a major drawback.

High cost of debt:

Since huge capital investment is required therefore cost of these debts is very high.

Lack of best quality and trained professionals has been a major drawback.

17

High cost of debt:


Export Market Penetration:

It is estimated that world steel consumption will double in next 25yrs. Quality improvement of

Indian steel combined with low cost advantages will definitely help in substantial gain in export

market

Consolidation:

As global companies have realized the threat of excess supply, they are looking at M&A

(mergers and acquisitions) option to retain market share and improve margins.

Threats-

Technological change:

Technological changes force the industry structure to change. In India where capital itself is

costly, technological obsolescence is a major threat.

Price sensitivity & Demand volatility:

The demand for steel is derived demand and the purchase quantity depends on end-use

requirements. The traders are price sensitive and buy when there are discounts.

Dumping of steel by developed countries:

High quality products for developed countries available for import at competitive price

Slow Industry Growth:

Slowing industrial growth in the country poses a constant looming threat to the steel industry.

18

MESSAGE FROM DIRECTORS DESK

“The First who innovates has the

reins of the game in his hands.”

Sanjay Singal

Chairman & Managing Director

19

Bhushan Steel and Power Ltd is a globally renowned and prominent player in Steel Industry.

BPSL is a 2.8 Million TPA Steel making company having turnover of U$D 1000 million.

The company is certified to ISO 9001:2008 & TS-16949 Quality Standards and ISO 14001-

2004 environment measurement standards.

During four decades of existence, BHUSHAN POWER & STEEL LTD. (BPSL) has grown

into a leading business house having diversified business interests in a range of basic and value

added products viz., DRI, Pig Iron, Billets, HR Coils, CR Coils, GP/GC Sheets,

Galvanised/Colour Coated Profiles, Precision Tubes, Black Pipe/GI Pipe, Cable Tapes, Tor

Steel and Special Alloy Steel Round Bars, RCS, Hexagons, Wire Rods and Bright Bars. Now

BPSL is reckoned as leading fully integrated Steel Company with State of the Art

manufacturing plants at Chandigarh, Kolkata and Orissa in India and overseas business interests

in Nepal, Nigeria, Ethiopia, Sudan, Senegal, Ghana, Benin and Dubai. BPSL have enjoyed

prime position in its market segments due to its leadership in manufacturing technology vis-à-

vis product quality that had established acceptability of its products amongst customers in

automotive (OEMs), auto-ancillary, engineering and Government sectors. Due to this quality

leadership, BPSL have been able to develop and supply various products including the niche

products for specific customers and specific applications. This however does not make us

complacent. Our zeal to be ahead of competition through technological up-gradation for process

Mission:

BPSL is having mission is to achieve clear identity and leadership globally in Steel production

and distribution by integration of complete chain of production starting from captive iron ore

to end user Steel products.

Values:

Quality: To be the best in quality. We aim and achieve excellence.

Technology: - State of the art technology and product enrichment by continuous Research and

Development.

BPSL AT GLANCE

20

Customer Friendly: Our products are world class and more and more clients are appreciating

and using our products. We also undertake customized products with values addition and

enhancement.

Corporate Governance: We comply with all applicable laws and regulations. We believe in

maintaining clean environment and conservation of natural resources. We contribute towards

betterment of our staff and provide them with best of facilities.

21

PRODUCTS

BPSL offers a wide range of standard and differentiated products for different and demanding

markets worldwide such as ultra-high strength steel for Automotive, speciality steels for

Aerospace and ultra-high hardness steels for Railways

Its Product can be differentiated as below:

Products

Flat Products

Cable Tapes

GP Coil

Steel Coil

GP Coil Sheets

Corrugated Sheets

Cold Rolled Sheets

Narrow CR Coil

Galvanized Coil

Black Pipes

Precision Tubes

Long Products

Wire Rods

Bar Mill

22

FLAT PRODUCTS:

1. Cable Tapes

These Tubes are widely used for Power and Industrial boilers, Transformers, Super heaters,

Automobiles and Bicycles, Railway Electrification, Furniture and General Engineering Applications

etc.

Specifications of Tubes

ERW TUBES CEW TUBES

OUTER

DIAMETER (MM)

6.00 TO 127.00 MM 09.00 TO 110.00 MM

THICKNESS(MM) 0.40. TO 6.00 0.80 TO 6.00

LENGTH UPTO 12 MTRS. UPTO 12 MTRS.

APPLICATIONS Automotive,Boiler & Heat

Exchangers ,Air Heater, GEN.

EGG., Bicycle & Propeller

Shafts

Automotive, Boiler, Shock Absorbers,

Textiles, General Engg. Propeller

Shafts, Cylinder bore tubes for

special applications & front fork tube

for two wheeler.

Precision Tubes are made at our Chandigarh and Kolkata plants.

23

2. GP Coils



etc.


ERW TUBES CEW TUBES

OUTER DIAMETER

(MM)

6.00 TO 127.00 MM 09.00 TO 110.00 MM



APPLICATIONS Automotive,Boiler & Heat Exchangers

,Air Heater, GEN. EGG., Bicycle &

Propeller Shafts

Automotive, Boiler, Shock

Absorbers, Textiles,

General Engg. Propeller

Shafts, Cylinder bore tubes

for special applications &

front fork tube for two

wheeler.


24

3. Steel Coils



etc.


ERW TUBES CEW TUBES

OUTER DIAMETER

(MM)

6.00 TO 127.00 MM 09.00 TO 110.00 MM



APPLICATIONS Automotive, Boiler & Heat


EGG., Bicycle & Propeller Shafts

Automotive, Boiler, Shock Absorbers,

Textiles, General Engg. Propeller Shafts,

Cylinder bore tubes for special

applications & front fork tube for two

wheeler.


25

4. GP Coil Sheets

Applications: Galvanised Coils and Sheets are used to make Boxes, Containers, Ducting, Cooler

Body, etc.

GP Coils are manufactured at our Kolkata Plant.

5. Corrugated Sheets

Corrugated sheets are extensively used for Industrial sheds, housing, temporary structures etc.

26

Specifications :

PLAIN SKIN

PASSED

CORRUGATE

D

HLGP

PETROL /

FUEL TANK

FGP

FAN

BLADE

GPC BUSES /

COACHES

Thickness(mm

)

0.10 to 2.50 0.30 to 2.50 0.12 to 1.60 0.30 to 2.50 0.40 to

1.20

0.60 to 1.60

width(mm) upto 1350 upto 1350 602,762,

800,900, 1050

200 to 1350 100 to

1350

100 to 1350

Cut To

Length(mm)

upto 4500 upto 4500 upto 4500 upto 4500 upto

4500

upto 4500

Surface Finish Regular &

mim.spangl

e

Matte with

zero/min.

spangle

Regular

Spangle

Matte,bright

finish,No

spangle

Matte

finish,

No

spangl

e

Matte, Bright

finish, No

spangle

Coating

Mass(gms/m)

80 to 300 80 to 300 80 to 300 20 to 80 60 to

90

60 to 80

Grades Soft/Lock

forming

EDD,DD,D

SPCEN,

SPCD,SPC

C

Roofing EDD,DD,D

SPCEN,

SPCD,SPC

C

SPCD,

SPCC

SPCEN,SPCD

, SPCC

Corrugated Galvanized Sheets are manufactured at Our Kolkata plant.

6. Cold Rolled Sheets

Cold Rolled Sheets are used in the manufacture of Automobiles, White Goods, Electrical Panels,

Furniture, Transformers, Oil barrels and drums and general engineering products.

CR Sheets are produced at our Chandigarh, Kolkata and Orissa plants.

27

7. Narrow CR Coils

Narrow Cold Rolled Coils are used in the manufacture of Automobiles, Precision Tubes, Cable

Tapes, White Goods, Electrical Panels, Furniture, Transformers, Oil barrels and drums and general

engineering products.

Narrow CR Coils are produced at our Chandigarh, Kolkata and Orissa Plants.

8. Galvanized Pipes

Galvanized Pipes find its uses in a number of applications including domestic, agriculture and

Industrial.

Galvanized Pipes are available in the sizes ranging from 10mm NB to 100 mm NB, Strip thickness

1.80 mm 5.40 mm

We manufacture GI Pipes at our Derabassi (Punjab) Plant.

28

9. Black Pipes

Black pipe is used for transportation of air, gas, fabrication of structure, automobiles, cycles and

general furniture industries. Varnished pipes are used for general engineering industries.

Black pipe is manufactured at our Chandigarh, Derabassi and Kolkata plants.

10. Precision Tubes


Automobiles and Bicycles, Railway Electrification, Furniture and General Engineering Applications etc.

29


ERW TUBES CEW TUBES

OUTER

DIAMETER (MM)

6.00 TO 127.00 MM 09.00 TO 110.00 MM



APPLICATIONS Automotive,Boiler & Heat


EGG., Bicycle & Propeller Shafts

Automotive, Boiler, Shock Absorbers, Textiles,

General Engg. Propeller Shafts, Cylinder bore

tubes for special applications & front fork tube

for two wheeler.


30

LONG PRODUCTS:

1. Wire Rod and Bar Mill

With the introduction of most technologically advanced special and alloy steel long product rolling

complex for manufacture of value added bars and coils, a new dimension has been added in BPSL's

long history in the steel business.

The Long Product Rolling Complex consists of a most modern 0.5 million tpa multiproduct Wire Rod and

Bar Mill (18 pass Horizontal & Vertical Continuous Mill) supplied by Danieli Morgardshammar, Italy and

KOCKS, Germany (4 pass mill).

The state of the art Wire Rod & Bar Mill, one of the most modern plants of this type in the world, will

produce:

Straight Bars

Bar in Coil form

Wire rods

31

DISTRIBUTION CHANNEL AND DEVLOPMENT:

WHAT IS DISTRIBUTION ?

The main purpose of distribution channel is to supply goods and services to the consumers

living in far off places. Distribution channel acts as nerve between the producer and end

customer. A farmer in Srinagar has an apple orchard. Once the apples are ripened he sells the

apples to an agent of Delhi. The agent collects the apples from Srinagar, packs them, and sells

them to a wholesaler at New Delhi market. The wholesaler then distributes them to various

retail fruit vendors throughout Delhi by selling smaller quantities.

Finally, we purchase apples from those vendors as per our requirement. Thus we find that the

product travels through several hands before reaching to the end customer. Thus distribution

channel has the responsibility of buying, transporting, storing, protection of good, sales of

goods into the market.

Distribution channel can differ from sector to sector i.e. distribution channel of FMCG products

involves a complex distribution channel, whereas the distribution channel in Iron and Steel

industry have less complex distribution channel.

Thus in short it can be defined as:

The rout taken by goods from producer to consumer is known as distribution channel

PRODUC CONSUM

ERR

AGENTS

RETAILER WHOLESELER

32

TYPES OF DISTRIBUTION CHANNELS:

There are two types of distribution channels:

Direct Distribution Channel:

In this channel, producers sell their goods and services directly to the consumers. There is no

middleman present between the producers and consumers. The producers may sell directly to

consumers through door-to-door salesmen and through their own retail stores.

For Example:

Bata India Ltd, HPCL, Liberty Shoes Limited has their own retail shops to sell their products

to consumers. For certain service organizations consumers avail the service directly. Banks,

consultancy firms, telephone companies, passenger and freight transport services, etc. are

examples of direct channel of distribution of service.

DISTRIBUTION CHANNEL

INDIRECT CHANNEL DIRECT CHANNEL

PRODUCER CONSUMER

33

Indirect Distribution Channel:

If the producer is producing goods on a large scale, it may not be possible for him to sell goods

directly to consumers. As such, he sells goods through middlemen. These middlemen may be

wholesalers or retailers.

A wholesaler is a person who buys goods in large quantities from producers; where as a retailer

is one who buys goods from wholesalers and producers and sells to ultimate consumers as per

their requirement, the involvement of various middlemen in the process of distribution

constitute the indirect channel of distribution.

Below are some of the important indirect channels of distribution.

The most common channel used in distribution channel is

WHOLESALER:

Wholesalers are one of the important middlemen in the channel of distribution who deals with

the goods in bulk quantity. They buy goods in bulk from the producers and sell them in

relatively smaller quantities to the retailers.

Characteristics of Wholesalers:

The followings are the characteristics of wholesaler:

Wholesalers buy goods directly from producers or manufacturers.

Wholesalers buy goods in large quantities and sells in relatively smaller quantities.

They sell different varieties of a particular line of product. For example, a wholesaler

who deals with paper is expected to keep all varieties of paper, cardboard, card, etc.

They may employ a number of agents or workers for distribution of products.

Wholesalers need large amount of capital to be invested in his business.

They generally provide credit facility to retailers.

He also provides financial assistance to the producers or manufacturers.

PRODUCER WHOLESALER RETAILER CONSUMER

34

FUNCTION:

Following are the functions, which a wholesaler usually performs.

(a) Collection of goods: A wholesaler collects goods from manufacturers or producers in large

quantities.

(b) Storage of goods: A wholesaler collects the goods and stores them safely in warehouses,

till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in cold storage.

(c) Distribution: A wholesaler sells goods to different retailers. In this way, he also performs

the function of distribution.

(d) Financing: The wholesaler provides financial support to producers and manufacturers by

sending money in advance to them. He also sells goods to the retailer on credit. Thus, at both

ends the wholesaler acts as a financier.

(e) Risk taking: The wholesaler buys finished goods from the producer and keeps them in the

warehouses till they are sold. Therefore, he assumes the risks arising out of changes in demand,

rise in price, spoilage or destruction of goods.

RETAILER:

Retailers are the traders who buy goods from wholesalers or sometimes directly from producers

and sell them to the consumers. They usually operate through a retail shop and sell goods in

small quantities. They keep a variety of items of daily use.

Characteristics of Retailers:

Following are the characteristics of retailers:

Retailers sell goods not for resale, but for ultimate use by consumers.

For example, you buy fruits, clothes, pen, pencil etc. for your use, not

for sale.

Retailers buy and sell goods in small quantities. So customers can fulfil their

requirement without storing much for the future.

Retailers require less capital to start and run the business as compared to

wholesalers.

Retailers generally deal with different varieties of products and they give a wide

choice to the consumers to buy the goods.

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Functions of Retailers:

All retailers deal with the customers of varying tastes and temperaments. Therefore, they should

be active and efficient in order to satisfy their customers and also to induce them to buy more.

Let us see what the retailers do in distribution of goods.

(a) Buying and assembling of goods: Retailers buy and assemble varieties of goods from

different wholesalers and manufacturers. They keep goods of those brands and variety which

are liked by the customers and the quantity in which these are in demand.

(b) Storage of goods: To ensure ready supply of goods to the customer retailers keep their

goods in stores. Goods can be taken out of these stores and sold to the customers as and when

required. This saves consumers from botheration of buying goods in bulk and storing them.

(c) Credit facility: Although retailers mostly sell goods for cash, they also supply goods on

credit to their regular customers. Credit facility is also provided to those customers who buy

goods in large quantity.

(d) Personal services: Retailers render personal services to the customers by providing expert

advice regarding quality, features and usefulness of the items. They give suggestions

considering the likes and dislikes of the customers. They also provide free home delivery

service to customers. Thus, they create place utility by making the goods available when they

are demanded.

(e) Risk bearing: The retailer has to bear many risks, such as risk of:

fire or theft of goods

Deterioration in the quality of goods as long as they are not sold out.

Change in fashion and taste of consumers.

(f) Display of goods: Retailers display different types of goods in a very systematic and

attractive manner. It helps to attract the attention of the customers and also facilitates quick

delivery of goods.

(g) Supply of information: Retailers provide all information about the behaviour, tastes,

fashions and demands of the customers to the producers through wholesalers. They become a

very useful source of information for marketing research.

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DISTRIBUTION CHANNEL OF BPSL:

Selection of distribution is a very strategic decision and is very vital for the organisation, thus

a very strict norm are followed before choosing a distributor at Bhushan Power and Steels Ltd

Types of Channel Intermediaries:

There are many types of intermediaries such as wholesalers, agents, retailers, the Internet,

overseas distributors, direct marketing (from manufacturer to user without an intermediary),

and many others.

The main modes of distribution will be looked at in more detail,

1. Channel Intermediaries - Wholesalers

They break down 'bulk' into smaller packages for resale by a retailer.

They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas

agents do not (see below).

They provide storage facilities. For example, cheese manufacturers seldom wait for

their product to mature. They sell on to a wholesaler that will store it andeventuallyresell to a

retailer.

Wholesalers often reduce the physical contact cost between the producer and consumer e.g.

customer service costs, or sales force costs.

A wholesaler will often take on the some of the marketing responsibilities.

Many produce their own brochures and use their own telesales operations.

2. Channel Intermediaries - Agents

Agents are mainly used in international markets.

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An agent will typically secure an order for a producer and will take a commission. They do not

tend to take title to the goods. This means that capital is not tied up with the

goods. However, a 'stockist agent‟ will hold consignment stock (I.e. will store the stock, but

the title will remain with the producer. This approach is used where goods need to get into a

market soon after the order is placed e.g. foodstuffs).

Agents can be very expensive to train. They are difficult to keep control of due to the physical

distances involved. They are difficult to motivate.

3. Channel Intermediaries - Retailers

Retailers will have a much stronger personal relationship with the consumer.

The retailer will hold several other brands and products. A consumer will expect to be exposed

to many products.

Retailers will often offer credit to the customer e.g., electrical wholesalers, or travel agents.

Products and services are promoted and merchandised by the retailer.

The retailer will give the final selling price to the product.

Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart in the USA, and Ali

super, Modelo, and Jumbo in Portugal4.

4. Channel Intermediaries - Internet

The Internet has a geographically disperse market.

The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish

Salmon direct from an Inverness fishery.

There are low barriers to entry as set up costs are low.

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Use e-commerce technology (for payment, shopping software, etc.)

There is a paradigm shift in commerce and consumption which benefits distribution via the

Internet.

5. Distribution Network Opted by BPSL

There are mainly two major networks by which the product moves through into the market

At BPSL we have both channel of distribution i.e. direct and indirect distribution channel

Thus further the business channel is categorized as below

B-B/B-C B-B

Within the Distribution category, the business is categorized as OE or Retail, based on whether

the customer is serviced directly, or through the Retail / Distribution network. In OE, there are

sub-segments like OEM distribution, and in Retail sub-segments like GC/GP retail distribution,

CR retail distribution, and geographic segmentation. In OEM distribution, the customers

Distribution Channel

Direct Indirect

OEM

Ex: - CRC Sheet, etc

Retail/ Export

Ex: - GC, GP sheet, GI Pipes

E-BIDDING AGENTS

DISTRIBUTOR

S

RETAILERS

39

specify the grade of steel that they require and the company takes responsibility to supply them

the same grade of steel in the agreed cut to size condition. In retail distribution, companies

maintain stocks of material for feeding its retail chain and provide Value for money products.

6. E-Bidding:

E-bidding is all new concept developed by BPSL for sales of its product to end consumer in a

more transparent and convenient manner. The adoption of internet technologies to create

efficiencies for the Steel industry continues to grow. The latest innovation being made available

to the industry is the ability to create tenders and submit bids online. The idea of online

transactions is not a new concept with everything from online banking to purchases of major

items such as vehicles all being transacted safely and securely. The challenge that makes the

management of bidding for steel products online so difficult is the many complicated pricing

options such as separate, alternate, unit, combined and other pricing options. Add to that the

need to handle items such as cash allowances, bid bonds, required time to perform the work and

schedules such as lists of Subcontractors and other details. Over the years these challenges have

been handled by creating what are often complex and detailed tender packages that need to be

completed and submitted in hard copy by a specified closing time.

Thus electronic bidding concept in steel BPSL was more transparent in the way, such that the

bidders are allowed to bid at same price.

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Distribution Network of BPSL:

BPSL has selected 28 distributors and 39 sales offices in different location across India. Every

distributor is given 2 days training session, after which they become confident about the product

and learn how to differentiate its product from its competitor product. Aggressive distribution

strategy needs to be adopted for covering large rural area. Distributors keep active sales force

to cover all the retailers in their geographical area. Their sales force visits different rural and

urban areas to attract retailers so that they can maximise their sales. Also, the sales force comes

up with attractive schemes for the retailers to help them achieve their target sales. Dealers keep

RSU vans which is used for transportation and advertising. All the distributors have upgraded

warehouse with weighing machine.

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BPSL's marketing set up consists of a wide marketing network both in India and abroad with

highly qualified and experienced sales & technical personnel, who have had rich exposure in

reputed steel industries and understand the customer's needs.

The modern communication systems ensure that the enquiries and orders generated from

customers are transmitted without delay to in-house service departments viz., Technical

Competence Canter and Supply Chain Management for further actioning.

BPSL's supply chain system is fully integrated in terms of both organization & information

system all the way from selection of raw materials to delivery of the products to customers.

Marketing, production planners and logistics experts work closely together, using the same

information system.

Employees based at local Sales Offices all over India & abroad are given specialized training

to enable them to understand and meet customer's needs by ensuring cost effective and reliable

supplies.

The company serves a wide variety of consumers, ranging from reputed contractors to retail

users from the private sector organisation to the public sector undertakings. These consumers

can be classified into 3 major groups:

1) Government

2) Retailer (B TO C)

3) Private sector consumers (B TO B)

To cater to the needs of all its consumers, the company does both (B to B selling) and retail

outlets (B to C selling). Bulk orders come under direct selling and small order from retail

outlets.

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MARKETING MANAGEMENT HIERARCHY:

MARKETING HQ

HQ SALES

Sales forecasting

Credit Policy

Traders Selection

Product Price

Decision /Transportation Pl

MS FUNCTION

Product Code

Control

Sales Report

Sales Analysis

Sales Projection

product wise to

top management.

REGIONAL SALES OFFICE

Sales order

Collection of

Payments

Credit Control

Business

Development

BRANCH SALES OFFICE

Collection Of

Payments

Credit Control

Sales to Traders

Sales to Project

Customers

Sales Accounting

BRANCH STOCKYARD

Receipt Handling

Sales Dispatch

Stock Transfer

Stock Maintenance

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DESIGN AND ENGINEERING:

The Company have successfully commissioned a 2.8 Million TPA Greenfield Steel and Power Plant in

Orissa with HR Coil making facility - First in Private Sector in the State of Orissa. For this plant,

technology and equipments were sourced from leading world-renowned companies’ viz., Lurgi, ABB

Ltd., SMS Siemag, SMS Meer Danieli, LOI Tenova, Kocks etc.

A. Employment Opportunities

At full operational stage, now BPSL plant has employed about 17369 technical staff. The

indirect employment due to various ancillary units Development and other services is much

more.

B. Training and Development

BPSL believes that the employees are its assets and strives to realize their potential in full for

mutual advantage. BPSL has trained workforce of about 8700 employees in direct contract with

the organisation

A trained cadre of technical operative personnel and managerial cadre are provided for the

successful commissioning and operation of a large steel plant like BPSL.

A training and development centre with facilities is available to develop trained cadre of

technical personnel and managerial cadre.

Employees are sent to other steel plants on short duration tours to find solutions to the various

issues facing the company. Employees are also sent to suppliers manufacturing units.

BPSL provides training programme for enhancing their knowledge.

C. Township

A Modern township with all amenities has been developed adjacent to the steel plant site, to

house the plant employees. The township is having protected drinking water supply, water

borne sanitation, black top roads, hospitals, welfare centres, community facilities, parks etc.

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D. Water supply

Operational water requirement of 36 mgd is being met from the Hirakud Dam.

E. Power supply

Operation power requirement of 390 MW is being met through captive

power plant. The capacity of the power plant is 286.5mw; VSP is exporting around 0MWPower

to OSEB.

F. Advertising

Bhushan Steels and Power Ltd is also following advertising, which is one among

the promotional strategies.

Print media

Brochures and booklets

Posters and leaflets

Directories

Symbols of logs

Bill boards

Displays

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MARKETING ACTIVITIES:

Under integrated marketing some of the important activities of the marketing management are

as follows:

Collection of necessary information regarding marketing

Analysis of the data and drawing conclusion

Search and development stage of new marketing techniques

To chalk out detailed marketing programme

To implement that marketing programme

To coordinate between the wants of the customers and their satisfaction

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RESEARCH METHODOLOGY:

“Marketing Research is the systematic designing, collection, analysis, and reporting of data and

finding relevant to a specific marketing situation facing the company.” The present study of

Steel markets in all over Sambhalpur is based on survey methods. In survey methods, there are

two types of survey. One is Census Method and another is Sampling Method. In this sample

survey methods I have taken only a small part of the whole and data collected from the small

part are made applicable to the whole i.e. I have taken Sambhalpur and some adjacent area of

Sambhalpur like Rengali etc. Within the time limit, I tried my best to select the sample

representative of the whole group. During my training, I maintained different chart for different

routes during my dealer survey. I have collected data from the distributor of Sambhalpur.

Primary data collection involved distributors, retailers and consumers.

47

SWOT ANALYSIS:

Strengths:

1. Availability of iron ore and coal:

BPSL has abundance of iron ore, coal & other raw materials required for iron & steel

making. BPSL Jharsugda, is very close to the mineral rich belt of Jharkhand and Orissa

2. Availability of Labour at low cost:

BPSL has low unit labour cost, this gets reflected in low cost of production

3. Abundance of quality manpower:

It has around 8700 permanent skilled manpower.

4. Have huge network of sales team, which caters the huge distribution network

5. Innovative ideas of sales directly to customer by introducing Auction sales

Weakness:

1. Unscientific mining:

BPSL is deficient in raw materials required by the steel industry. BPSL has to source

the raw materials from different companies like Vedanta. Has to outsource coal from

different mining companies

2. Low productivity:

As compare to European and US counterpart, productivity is less.

3. Inadequate infrastructure:

Insufficient freight capacity and transport infrastructure hamper the growth of BPSL

4. Low R&D investments:

There are inadequate investments in infrastructure.

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5. Lack of best quality and trained professionals has been a major drawback.

6. High cost of debt:


Opportunity:

1. Export Market Penetration:

It is estimated that world steel consumption will double in next 25yrs. Quality

improvement of Indian steel combined with low cost advantages will definitely help in

substantial gain in export market

2. Consolidation:

As global companies have realized the threat of excess supply, they are looking at M&A

(mergers and acquisitions) option to retain market share and improve margins.

Threats:

1. Technological change:

Technological changes force the industry structure to change. In India where capital

itself is costly, technological obsolescence is a major threat.

2. Price sensitivity & Demand volatility:

The demand for steel is derived demand and the purchase quantity depends on end-use

requirements. The traders are price sensitive and buy when there are discounts.

3. Dumping of steel by developed countries:

High quality products for developed countries available for import at competitive price

4. Slow Industry Growth:

Slowing industrial growth in the country poses a constant looming threat to the steel

industry.

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RECOMMENDATION:

1. Needs to increase the Sales network

2. Overseas expansion must be the prime focus

3. New Research and Development work should be taken, so as to increase production

capacity.

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CONCLUSION:

From the data analysis and survey conducted by me, I arrived at the following conclusions:-

1. BPSL has a huge technological advantage to those against its competitor.

2. It has huge product differentiation as compared to its competitors.

3. One of the major drawbacks of BPSL is its less no of retail outlet in India and abroad

4. The major problem faced by the distributor is the shortage of supply.

5. Distributor functions just as order takes; they should contribute me and communicate to

the retailers.

6. It should be checked that whether our products is reaching to the outlets timely and

regularly or not.

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Questionnaire for selection of Dealerships

Organisation Name:

Registration Number:

Location:

Address:

Please fill below:

1. Have you being associated with BPSL before ?

a. Yes b. No

2. How long you are associated with BPSL

……………………………………………..

3. Are you dealing with other Steel Companies ?

a. Yes b. No

4. Which Steel Companies you are associated with ?

(To be filled in only if your answer to Question Number 3 is yes)

Sr No Name of Organisation Period

1.

2.

3.

4.

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5. Area of your Warehouse ?

---------------------------------Sq/Mt

6. List of Organisation you are co-dealing and how long?

Sr No Name of Organisation Capacity/Month Period

7. Your approximate sales in tonnes / Month / Year..?

a. 50 to 100 b. 100 to 150

C. 150 to 200 d. 200 to 250

d. More than 250.

Note:

Please attach the following documents:

a. Bank statement for the last three years.

b. Turnover for the previous year as per latest ITR filing.

53

References:

www.bpsl.net

www.worldsteelorg.com

www.steel.gov.in

www.crugroup.com

www.bsisteels.com

www.steelassoc.com

www.tatasteel.com

www.google.com

distribution channel at bhushan power and steels ltd

Marketing

front fork tube

insufficient freight capacity

cylinder bore tubes

purchase quantity depends

special applications

general engineering applications

constant looming threat

export market penetration