I Anupam Agrawal office manager of Mahamaya Steel Ltd. It is located in Raipur (Chattisgarh). It manufactures 5 products – sleeper, joist, H beam, Channel and Round. MSI has state of the art fully automatic 26′ Rolling mill which has a production capacity of 205500 metric tonne per year. Its customer base is spread all over the country.

We have 20 salesman who takes order from distributor in different states. Till now our entire process was mechanical. But now we want to make our entire sales detail on web so that it will be updated fast and people can have access from different location across country. We want a small system that will help you track orders as they are picked up your sales force. Also sales force should not pick up orders when there is no inventory in the warehouse.

Following items should come in small system:

1) Distributor and salesman detail and their order ( Distributor, salesman, Product, Quantity)
2) Our product detail (products and price)

Example of a small system:

http://www.creator.zoho.com/agrawalanupam/inventory-details/ 

Just click on the link and you will get all details Final Report on Iron and Steel Industry

Praxis Business School

Assignment No. 1

Export as a Engine of Growth

A report

Submitted to

Prof. Prabal Sen

In partial fulfillment of the requirements of the course

MTP

On 28-02-08

By

Amit Kumar

Anupam Agrawal

Avadhut Kaluskar

Shashank Vyas

Table of content

Export as a Growth Engine

Prologue

Talking about the topic two most important words come to one’s mind i.e. Growth and Export, so we would like to define these two important words before moving deep in to the topic.

Export - The exchange of products and/or services with or without the use of money.

Trade- Occurred since the time of the Stone Age when people exchanged goods and commodities by means of barter trade. Trade has expanded at an accelerating rate since the end of World War II. Statistics show that over the past 55 years’ time between 1950 and 2004, global trade increased 145 times at a rate of 2.6% per year.

Globalization plays a critical role in the future of successful businesses. It’s a fact that companies engaged in international business are more stable, achieve higher growth rates, and pay higher wages. Exports are vital to the state’s economic health as well. The benefits of exporting extend beyond the obvious advantage of profit earnings.

Two important factors are regarded as the main contributors to an upward trend of the global trade growth:

o Advances in transportation, communication and information technologies that helped facilitating trade, reducing transaction and transportation costs, and increasing economy of speed and efficiency which lead to an increase in trade.

o Improvements in trading environment of negotiation and formation of multilateral, regional and bilateral trade agreements which reduced tariff, non-tariff barriers, and trading costs; increased competitiveness; and expanded trade.

Recall the formula for gross domestic product, C + I + G + (Ex – Im). The expression (Ex – Im) equals net exports, which may be either positive or negative. If net exports are positive, the nation’s GDP increases. If they are negative, GDP decreases.

Export Theory

Classical economists Adam Smith and David Ricardo emphasised the importance of International trade for a country’s economic growth. They argued that a country could benefit considerably if it specialised in a certain commodity or product and then exported it to the foreign countries that lacked this commodity.

However, there are several shortcomings of the this classical theory

o The theory does not incorporate a perspective on the consequences of the deteriorating terms of trade, which became a central trade issue between the developed and developing nations.

o Secondly, it is not always possible to spot in advance a country’s comparative advantage.

Empirical Model

Here is a mathematical model which tries to explain the relationship between Export and Economic growth and the effect of exports on non –export sector. This model assumes economy to be divided into two vertically integrated Export (X) and Non Export (N) sectors. Externalities generated by Export for Non Export sector are incorporated by assuming:

N =f (Kn, Ln, X)

Where Kn and Ln are capital and labour employed in non-export sector.

Taking GDP (Y) to be a sum of X and N, the estimated equation is:

Ry a (I/Y) bRl c (X /Y) Rx dRx

Where I/Y= rate of investment

X/Y = share of exports in GDP.

Ry, Rl, Rx are rate of growth of GDP, workforce and exports respectively.

Special Economic Zones- Engine for Growth

Evolution:

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

The main objectives of the SEZ Act are:

o Generation of additional economic activity

o Promotion of exports of goods and services

o Promotion of investment from domestic and foreign sources

o Creation of employment opportunities

o Development of infrastructure facilities

SEZ Approval Status

Consequent upon the SEZ Rules coming into effect w.e.f. 10th February, 2006, Twenty-one meetings of the Board of Approvals have since been held. During these meetings, formal approval has been granted to 439 SEZ proposals. There are 138 valid in-principle approvals. Out of the 439 formal approvals, 195 SEZs have been notified.

Current investment and employment:

• • Investment: Rs. 67347 crore
  • Employment: 61015 persons

Exports from the functioning SEZs during the last three years are as under: Exhibit- 1

From the graph below any one easily make out the impact on SEZ on export.

Comment

SEZs, especially if one or two successful examples emerge, could yet play a significant role as policymakers increasingly follow a more export-led development strategy to accelerate economic growth.

Myths regarding export as a growth engine

Till now we have been discussing the positive facts about trade as a growth engine but as every coin has a flip side export too have some negative aspects.

Jobless, rather than job creating

Import sectors leads to job loss and dislocation in the economy. On an ex-ante basis, the net impact of trade on poverty reduction is indeterminate and it will depend on the relative size of the export sector and the import competing sector in a country’s economy.

Ruthless, rather than poverty reducing

Subsidies given by developed countries raise domestic prices of agricultural goods; they encourage farmers to produce more. The surplus production is then dumped into the international market at a cheaper price. Again subsidies are used to cover the difference between domestic prices and international prices. Excess supply and dumping of agricultural goods drive down their prices in the international markets. The farmers of developing countries suffer from such undercutting not only by losing markets in third export markets but these cheap imports also threaten their domestic production base. This can potentially have disastrous implications for the vulnerable section of the population in developing countries.

No significant gains

The potential to gain from services trade liberalization has been constrained by the fact that so far services had been liberalized dominantly in sectors of primary interest to developed countries like telecommunications and banks and insurance sectors. Movement of labour, which probably holds maximum promise for developing countries, is still very much restricted.

Today, many different barriers constrain the movement of individuals. The most obvious barriers are explicit quotas or economic needs tests. Many formalities (for example, to obtain a visa) make red tape related to FDI seem trivial by comparison.

Conclusion

Thus given this lopsided nature of the multilateral trade regime, it is not surprising that trade liberalization has not resulted in any significant reduction in poverty in developing countries. Instead there is overwhelming evidence that inequality across the world has gone up. Against this backdrop, it is not very difficult to understand why the current WTO trade talks have run into problems. Taking advantage of this, many developing countries are now looking trading relations among themselves just to avoid the frustration with the multilateral trading system. Such South-South RTAs may emerge as a possible alternative as they allow developing countries to expand their markets without having to accept lopsided treaties.

Facts and Figure

Goldman Sachs has lowered the GDP growth forecast to 7.8 per cent from 8 per cent for the year. The report, however, says the Indian economy remains largely on course on account of its structural strength. Adding to fears that exports growth will slow down due to appreciation of rupee and a global slump, the report said shipments will nearly halve, with software, textiles and apparels, gems and jewellery sectors being the worst hit.

The robust overall growth of export sector of Indian economy led to secondary growth of the following economic parameters

• India’s economy grew at 9.3% in quarter April-June and it was driven by manufacturing, construction and services sector and agriculture sector
• GDP factor for the first quarter of 2007-08 was at Rs 7, 23, 132 crore, registering a growth rate of 9.3% over the corresponding quarter of previous year.
• India’s FOREX reserves (excluding Gold and SDRs) stood at $219.75 billion at the end of July ‘ 07
• The annual inflation rate was 4.45% for the week ended July 28, 2007
• India’s Balance of Payments is expected to remain comfortable
• Merchandise Exports recorded strong growth
• According to reports, productivity growth rate of Indian economy is estimated to be around 8% and above until 2020

Bibliography:

www.sezindia.nic.in

www.rediff.com/money/2007/aug/18guest.htm

www.ibef.org/artdisplay.aspx?cat_id=561&art_id=13294

www.thehindubusinessline.com/2003/09/04/stories/2003090400030800.htm

www.google.com

www.wikipedia.com

www.ieo.org/AboutIEO.html

Exhibit- 1

— Projected exports from all SEZs for 2007-08: Rs. 67088 crore

Praxis Business School

Iron and Steel Industry

A report

submitted to

Prof. Srinivas Govindrajan

In partial fulfillment of the requirements of the course

Marketing Management – 2

On 29-12-07

By

Anupam Agrawal

DISTRIBUTION CHANNEL USED BY LEADING PLAYERS

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 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. In Distribution, the Steel Mills are the key suppliers and they play a very valuable role in the supply chain as they are responsible for providing the correct quality of steel, its timely delivery, post- sales support and joint marketing support.

TATA STEEL

DISTRIBUTION CHANNEL

G C sheets:

Traditionally G C sheets were considered as a commodity. Over time, TISCO has succeeded in differentiating its product and becoming a market leader. Presently it has 32% market share in the G C sheets industry.

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.

Tata steel has selected 28 distributors 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.

Tata steel segments its retailers in 4 categories

1) The star

2) The challenger

3) The friend

4) The dog

In the diagram below we have the potential of the retailer to meet sales targets in y axis and the retailer’s loyalty in the x axis.

Star – high potential and high loyalty

Challenge – high potential but low loyalty

Friend – high loyalty but low potential

Dog – low potential and low loyalty

POTENTIAL

LOYALTY

Tata shakti has 5000 retailer across India. It has 683 retailers in Maharastra. They had classified its retailer on the basis of potential and loyalty. They had offered different schemes to retailer according to their sales. They offer great discount for their star retailer, so it act as a motivator for the challenge retailers to come in star segment. Channel capability can be build by deployment of effective sales force and by ROI guarantee schemes for retailers. Stock points are located at convenient locations which are easily assessable by customers.

They follow a simple philosophy for distribution: To create a

Professional distribution through an organised retail network focused on servicing natural local market that captures value of brand.

Tata sells about 40 per cent of its total flat products, both hot-rolled and cold rolled products, through the distribution channel while the remaining 60 per cent is directly sold to customers.

SAIL

JSW

JSW Group is driven by the demands of its customers and it cares to meet their needs. A nation-wide marketing network and consignment agents ensure availability of its downstream products in every nook and corner of the country. Taking advantage of the emerging demands from the western markets, both auto and non-auto sectors, the company has significantly improved its performance in the export segment too.

The group has significantly improved its performance in the export segment. JSW Steel Limited’s downstream exports constitute more than 1/3 rd of India’s total exports of galvanised products. Seventy five percent of JSW Steel Limited’s galvanised products go to over 45 countries developing & developed, where the Jindal brand GalvPlus occupies the number one position.

JSW Group has long term agreements with leading European service centres and end users to supply galvanised products and has entered the US market as well. The company is committed to maintain international quality standards, efficient delivery schedule, competitive prices and excellent after-sales service.

COST OF EACH LAYER OF THE CHANNEL

B2B SELLING:-

B2C SELLING:-

*All percentages are on the selling price

India’s rapid economic growth is being built on a frame of steel. Soaring demand from sectors like infrastructure, real estate and automobiles both home and abroad, has put India’s steel industry on the world steel map.

The rapid rise in the production has resulted in India becoming the fifth largest producer of steel in the world, up by two places, on the back of 50.71 million tonnes (mt) production of crude steel and 51.9 mt of finished steel. The production of finished steel grew by 16.52 per cent, from 44.54 mt in 2005-06 to 49.39 mt in 2006-07.

Robust distribution network is required to cater to customers around the world. It plays an important role in capturing market share. Iron and steel products were considered as commodity, but in the recent past, major players have differentiated their product and created a brand.

The products in the Iron and steel Industry are classified into categories:

Heavy structure (B to B): Here FAB concept is followed. Customers follow SPANCO method for making purchase in Iron and Steel Industry. In this type, usually bulk orders are placed. So company indulges in both direct selling and through trader. In case of direct selling, there are no additional expenses. Company’s keeps certain set of traders or dealers who deals with small orders. Company assigns targets for their traders and provide them goods at a reduced price. The Price of Iron and Steel keeps fluctuating because it depends on the various factors. The profit margins also vary from 1.25% to 2%, according to market demand and supply. Here trader plays an important role in the distribution channel.

Consumer’s goods (B to C): There is huge competition in this segment and gain a competitive edge, the distribution channel needs to be robust. Adequate profit margins are given to both retailer and distributor, so that they will better push their brands. Good ROI will motivate them to sell more and maintain a good relationship with the distributor. Location of the store is an important factor to differentiate the product. Aggressive marketing strategy is adopted by distributor to cover their geographical area. Usually 1 or 2 distributers are selected by company in a state which will cover all retailers in their area. Sales force plays an important role in gathering information and adding new retailers. Distributors are given a profit margin of 0.25% to 1.5% on the sales price. They take bulk order from company and distribute it between its retailers. Company organise various training programmes for the development of the distributor and reward them as per their performance. Retailers get a profit margin of 2.5% to 4%, out of which they offer discount to their customers. Retailers are given a higher margin because of the high competition in the industry. Retailers usually keep products of other companies, so the retailer push becomes a very important factor. Distributor gives attractive offers to retailer for increasing their sales figure which benefits both distributer and retailer.

Company’s profit margins vary with the level of integration. When the processes are integrated cost comes down significantly. Therefore the more the plant is integrated, the higher are the profit margins. Profits also vary with electricity charges and the prices and the availability of raw materials

TRENDS IN DISTRIBUTION IN THE IRON AND STEEL INDUSTRY

· TATA STEEL introduces the hub and spoke model

Tata Steel made changes in its distribution system and introduced the hub and spoke model to reduce expenditure on logistics.With an aim to create new paradigms in steel retailing, Tata Steel launched ‘steeljunction’ – India’s first organised steel retail store. The company has also derived significant value from initiatives like Retail Value Management and Customer Value Management.Tata Steel has successfully created high brand recall. It is continuously working towards building new business models by forging alliances with customers and suppliers to strengthen the value chain that in turn will help the company to reduce operating costs, improve service levels and offer new products and services.

· Change in Consumer Awareness

In case of consumer goods customers were not aware of the different prices and sizes of the product. Retailers took the advantage and started misleading customers due to which they ended up paying a higher price. It was necessary to enlighten customers about the product specifications.

Tata Shakti was the first brand to mention the thickness on the sheet. They also made their pricing transparent and published all the prices in the newspaper. Consumers were now better informed and confident of their purchase.

· Today stores aren’t the usual saria store with untidy stacks of steel rebars taking up almost every inch of the floor and going well up to the ceiling.

POSITIONING PLATFORMS, ADVERTISING CAMPAIGNS AND ADVERTISING TRENDS IN THE INDUSTRY:

POSITIONING PLATFORMS IN THE INDUSTRY:

The companies have identified or rather classified their customers into three broad categories, they are:

1. Government customers

2. Retail users

3. Private sector customers

Advertising campaign and corporate communication strategy would differ from market to market and customer segment to segment.

We will analyse the various ad campaigns, keeping in mind the positioning platforms of these leading players.

We found that since steel represents “strength, reliability and quality” in the minds of the lay-man, the ad campaigns of the leading players also focus on these attributes or features. A few companies are able to differentiate their products and charge an extra premium like TATA TISCON. Another reason why customers are ready to pay premium for branded products is “Trust”.

For instance, TATA TISCON’s Stampede print ad has the tagline as “Sasta loge to pacht-taoge”.

ADVERTISING CAMPAIGNS AND ADVERTISING TRENDS IN THE INDUSTRY:

Branded steel bar manufacturers are actively communicating to the end-user, just like any other FMCG brand.

Modern shops of TATA TISCON is bright and colourful, its walls painted in contrasting panels of stark white and acid yellow — the colour of TATA TISCON.

Stores have charts with recommended prices, bold sign offering “home delivery” and also a photograph of actor Sanjay Dutt with the tagline Steel ka naya funda!

Clean and airy, modern stores is a testimony to how far branded TMT (thermo-mechanically treated) bars, an improved variety of steel reinforcement bars, have transformed the commodity trade in steel reconstruction bars.

Steel rebars were traded like any other commodity: by weight, with no one — manufacturer, retailer or consumer — giving a thought to quality, packaging, or standardisation of product, much less in-store branding.which changed now, estimates show TMT bar brands spend close to Rs 100 crore (Rs 1 billion) on advertising and brand promotion, calculating an average of Rs 3 crore (Rs 30 Million) or so among the over 30 branded TMT-bar makers. One of the biggest advertisers in the category, Elegant TMT bars has an Rs 5-crore (Rs 50 Million) annual marketing budget for the electronic media alone.

Outdoors was the medium of choice, but now advertisements on radio and TV and film-stars as brand ambassadors are becoming common. Quite like any fast-moving consumer goods like soap or toothpaste — except that Sanjay Dutt or Dharmendra are signed on instead of Kareena Kapoor or Aishwarya Rai.

Public sector steel manufacturer SAIL introduced TMT bars in India in the 1990s, the category really took off only after the launch of Tata Steel’s branded rebar TATA TISCON, in 2001because of its mass media promotion.

Few findings include:

1. few end-consumers were aware of the finer points of TMT bars;

2. And, consumers often felt they had been cheated by the retailer.

Building on these lessons, Tata Steel unleashed a slew of outdoor ads, hoardings, wall-paintings and bus-shelters with its signature creative — the outline of a fist holding aloft a TMT bar on a bright yellow background, with the punch-line “atoot jod”.

Other FMCG-like innovations include product packaging and standardisation of pack-sizes. For instance, TATA TISCON, which used to sell in bundles of 80 tonnes, has started to sell in single pieces of fixed length — the way the product is sold the world over.

Of-late commodities are increasingly being branded, whereas FMCG like soaps and toothpastes are increasingly pronounced to be commoditised. Internationally, generic products are moving up the value chain and commanding a premium on the perceived value additions. The interesting thing about TMT bars where branding is the new buzzword, is that the end user — the house-owner — almost never has a say in what variety or brand is used.
Unlike the buyers of apartments, who are very careful and always ask about the bathroom fixtures or tiles being used, no one thinks to ask what TMT have been used, something that is far more important. That’s where brand communication comes in.

With tremendous competition around, branding helps break the clutter in the commodities trade. For the consumer, it acts as a decision maker, because the brand communication promises a solution to their problems — on-time delivery, strength, and so on. Over time, an emotion builds up around the brand.
Consider ELEGANT Steel’s print ad — brand awareness pole-vaulted to new heights as a consequence.

Companies have identified ’strength’ as the core motivation for consumers when they buy/construct new home. Companies therefore have appropriated it and made relevant noise about the Strength (Quality to some extent) of their products through the TVC, Radio, Hoardings, and print campaigns as well as below-the-line campaigns.

The TATA TISCON TVC aims to make an emotional connect, fixing on strength as the core motivation of consumers buying TMT bars.

When steel rebars were traded as a commodity, their price was determined by the price of steel at the time. But with branding, TMT rebar manufacturers can claim to have added value and hence, command a premium and also fix a price that is not tied to the cost of steel.

And, consumers need some prodding since the price differential between branded and unbranded goods is significant. While the per tonne price of local, commonly used tor-steel rebars is around Rs 23,000, that of a TMT bar is Rs 26-28,000. Premium brands can go higher.

POPULAR ADVERTISING CAMPAIGNS

OUTDOOR CAMPAIGNS:

Campaign Objectives:
To differentiate the product.

To increase consumer awareness.
Target Audience:

Builders and matured urban consumer market.

Positioning of the brand:

New age product for new age customers.

Campaign Objectives:
Creating differentiation by displaying the product strength

Target Audience:

Masons, new home builders and medium income group.

Positioning of the brand:

Positioned as a strong product vis-a-vis competitors product.

Campaign Objectives:
Customised ad campaign targeting a specific geographic segment.

Positioning of the brand:

Strong homes built with strong TMT bars.

TELEVISION CAMPAIGN:

Campaign Objectives:
To increase customer awareness.

Target Audience:

Families planning to buy/build new home.

Positioning of the brand:

More rib areas to keep cement and steel unshakebly bonded, creating a strong building structure.

PRINT CAMPAIGNS:

Companies use the print media to advertise their products targeting market segments from high-end consumers with ads like “no good without the other”, “you choose the best bone china”, etc. To low income group with ads in local language.

BELOW THE LINE PROMOTION:

BROCHURES:

News letters are distributed among the dealers and retailers giving them more information about the product, the new developments keeping them aware of the changing market conditions. The performance of every distributor is highlighted and the best performer is recognised and rewarded as their star performer.

MEETS:

The companies organise regular meets for:

1. Mason

2. Architects

3. Consumers

4. Engineers

.

OTHER CAMPAIGNS:

I. Kite flying competition

II. Cycle-rickshaws

III. Road shows

IV. Haats

V. Wall paintings

IRON AND STEEL INDUSTRY

Submitted By:

S A Enayath

Abhisek Banerjee

Gaurav Motwani

Anupam Agrawal

ANALYSIS OF IRON AND STEEL INDUSTRY

We analyse the Indian steel sector with an attractive stance based on a bullish outlook for steel demand and pricing trends. We believe that the fundamentals of the Indian steel sector remain robust. With an economy that is decoupled from global economic and consumption growth and underpinned by aspirations of a rising middle-class, we believe it is time for India to enter a steel-intensive phase of economic growth. The robust pipeline of infrastructure build-up and healthy consumption trends will be at the core of steel demand growth, in our view. With adequate deposits of high grade iron ore, a technically trained manpower base, a long history of steel making, and more importantly a buoyant and fast growing domestic market, we believe India is ideally positioned to emerge as a hub for steel production in the region. We prefer plays that are leveraged to domestic steel demand growth and will benefit from tightening raw material markets.

India stacks up as the sixth largest steel producing nation in the world. The Indian steel industry has been operating at average capacity utilization levels of 90% over the past three years. Of this, the major producers comprising large integrated players (the organized sector) have been operating near peak utilization levels. Therefore, incremental growth in production, in our view, will be driven by ramp-up of recently built capacity, and/or commissioning of new Brownfield/Greenfield capacity.

We expect strong demand growth in India over the next five years, driven by a boom in construction (60%-plus of steel demand in India). Outstanding projects in India currently stand at US$1 trillion, growing 60%-plus YoY. Even at a marginal completion rate, steel demand would be an order of magnitude higher than that seen in the past. For example, even if two-thirds of the government’s 11th Plan infrastructure targets (total spending of US$350 billion) are met, about 100 MT of steel demand could be generated. We estimate a

16% CAGR in 2008-12, in line with the 16% capacity CAGR we anticipate. In case domestic demand disappoints, export remains an option, although we note that the cost advantage of captive iron ore is more than compensated by inefficient production (an extra US$92/ton of cost).

Crude steel capacity in India is expected to double over the next five years (a 16% CAGR) to 95 MT This is mostly in expectation of a sharp spurt in domestic demand. So all big the players are on expansion mode. Nearly every big player has announced their upcoming project in future.

SUMMARY OF THE MAJOR STEEL CAPACITIES ANNOUNCED

COMPETITION ANALYSIS

1)    Concentration Ratio:

In Economics the concentration ratio of an industry is used as an indicator of the relative size of firms in relation to the industry as a whole. This may also assist in determining the market form of the industry. One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry. In general, the N-firm concentration ratio is the percentage of market output generated by the N largest firms in the industry.

·         The 4 firm concentration ratio of the Iron and Steel Industry is 71%.

·         This implies that there is oligopoly in the industry as it is dominated my few major players. Major percentage of market output is generated by the 4 largest firms in the industry.

2)    Herfindahl Index:

The Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. It is an economic concept but widely applied in competition law and antitrust. It is defined as the sum of the squares of the market shares of each individual firm. As such, it can range from 0 to 1 moving from a very large amount of very small firms to a single monopolistic producer. Decreases in the Herfindahl index generally indicate a loss of pricing power and an increase in competition, whereas increases imply the opposite.

·         Value of Herfindahl index for Indian Steel Industry is 2470.

·         It implies that the competition in the steel industry is medium to high and high concentration.

3)    Michael Porter Analysis 

Porter’s 5 forces analysis is a framework for industry analysis and business strategy development. It uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term microenvironments. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.

Bargaining Power of Suppliers – Low

·  Major Players have their own iron Ore Mines

Bargaining Power of Buyers – High

·  Large number of suppliers and Access to Global Markets.

Barriers to Entry – High

·  Huge Capital Requirement

·  Huge Economies of Scale

·  Well Established distribution network for existing players

Threat of Substitutes – Moderate

·  Aluminum and Plastics can be used by the automobile industry

Industry Rivalry-High

·  Large no of unorganized players

Major players are competing among themselves

RATIO ANALYSIS OF LEADING PLAYERS

Per share Ratios

I. Dividend per share-Dividend is distribution of profit among members.

SAIL has paid a dividend of 3.1 Rs/share in 2006-2007 which is quiet low as compared to TISCO and JSWL who has paid 15.5 and 18 Rs as dividend/share respectively. SAIL might wants to keep a major part of their profit in reserve for their future expansion. TISCO has paid the highest ever dividend i.e.Rs.130, plus 25% special dividend.

II. EPS-Earning Per Share (in Rs.)

• SAIL’s EPS was highest in 2005 i.e. 16.5, which declined to 9.72 in 2006 and then increased to 15.02 in 2007.This signifies that profit in 2006 were less due to which EPS was low.
• If you look at TISCO, EPS is quiet high as compared to SAIL. It was 66.27% in 2005 which increased to 72.71% in 2007. The difference is due to the larger profit of TISCO than SAIL.
• JSW has the highest EPS of 65.27% in 2005,which increased to 77.09% in 2007.This was due to lower number of outstanding shares with the company and the higher profit margins.

Profitability Ratios

I. Return on Equity (ROE) -ROE is one of the measures of how efficiently the company uses its assets to produce earnings.

• SAIL had 88.85 % of ROE in the year 2005 which declined to 41.47% in 2007. The reason for higher return was large debt carried by the company and lower book value. Profits were also good in 2005.
• TISCO had comparatively less ROE i.e. 60.02% in 2005 which declined to 35.62% in 2007 .It had large debt in 2005, which they paid off gradually and issued new shares.
• JSW had very low ROE of 39.89%in 2005 which declined in 2006 and then increased in 2007 to 26.98%. The company had lower profits in all the three years. It has the lowest ROE among other players.

II. Return on Capital Employed (ROCE) - It is a measure the company is realising from its capital employed.

• SAIL had the highest ROCE of 68.77% in 2005 which had declined to 58.27% in 2007.The company has utilised the shareholders fund to the optimum level and had given very good returns.
• TISCO also had a very good ROCE of 63.79% in 2005 which again declined to 36.79% in 2007.In 2007 share-holders funds was very and lower debts due to which ROCE declined.
• JSW had given the lowest return of 30.8% in 2005 which again declined to 26.24% in 2007. This signifies that share-holders fund must had increased in 2006 and then declined in 2007.

Leverage Ratio

Debt Equity Ratio- It is a measure of the company’s financial leverage.

• SAIL has paid their loan over the years and had maintained a lower debt equity ratio. The company is in a very good position and can easily take debt for their future expansion.
• TISCO has repaid their secured loans over the years. In 2007 their unsecured loan increased suddenly due to which their debt equity ratio went high up to 0.69%.This was due to their contribution towards Corus financing.
• JSW had comparatively higher debt equity ratio in 2005 which has decreased to 0.84 in 2007.That means the company has paid off their debt and is in better leverage position.

Liquidity Ratio

Current Ratio- The current ratio gives an indication of a firm’s ability to meet its cash obligations coming due within the next year.

• SAIL had a high current ratio of 1.59%, 1.23% and 1.18% in 2007, 2006 and 2005 respectively, which indicates that current asset has increased over the year. Company is keeping more of quick asset for their working level expansion.
• TISCO had a low current ratio of 0.71% in 2005 and 0.72% in 2006 but a high current ratio of 1.74% in 2007, which signifies that company want to keeps more of liquid funds in coming years as they are on expansion mode.
• JSW had a low current ratio of 0.98% in 2005, 0.89% in 2006 and 0.75% in 2007, which could indicate a developing cash flow problem.

Payout Ratio

Dividend Payout Ratio (DPR) - It looks at what percentage of the company’s earnings is paid out to the shareholders.

• SAIL had paid a DPR of 23% over the years. This signifies that the company is paying a good share of the profit to the share-holders.
• TISCO had paid a comparatively higher DPR of 25% over the years. The company knows the importance of their stake-holders and rewarded them well. The company has kept aside a large sum of their money for expansion plans.
• JSW had paid a very low DPR of around 17% over the years. This signifies that the company is trying to retain most of their profit to fund growth.

Coverage Ratio

Financial Charges Coverage Ratio- It measures the ability of a company to service its debts in relation to its financial charges.

• SAIL’s financial position had improved over the years. In 2005 it was 18.45% which improved to 33.12% in 2007. This signifies that the company is in a better position to pay-off their interest and fixed charges.
• TISCO’s paying capacity was comparatively good over the years. It was 36.46% in 2006 which decreased to 29.18% in 2007. This was due to higher interest paid on unsecured loans.
• JSW‘s ability to satisfy its fixed financing expenses is low. It was only 4.93% in 2005, which marginally increased to 6.99% in 2007.The company’s fixed charges and interest is quiet high.

Capital Market Ratio

Price Earnings Ratio (P/E Ratio) - It tells you how much the company is going to pay for a stock in relation to its current earning power.

• SAIL‘s P/E Ratio was best in 2005 which was 3.92% along with higher return on equity. It was one of the best companies to invest in. In 2007 it increased to 7.85.Lower P/E Ratio is favourable.

• TISCO has maintained a P/E Ratio of 6.5% over the years. It went high in 2006 to 8.72%, but again came down to 6.5% level. The company’s return on equity is quiet favourable, so it is a good company to invest in.
• JSW had maintained a P/E Ratio of 8.5% over the years which is comparatively high than the other companies in the same industry. The company’s return on equity is quiet low, so it is a good company to invest in.

Du Pont Model

It provides a unique look into an operations financial structure and operating efficiency.

1. Net Profit Margin Ratio- It is a ratio comparing net profit after taxes to revenue.

• SAIL had very high net profit margin in 2005 i.e. 23.19%.In 2006 it dropped to 13.79%, which was due to high global steel prices. In 2007 it again reached to 17.38 because of higher sales in 2007.
• TISCO has maintained a consistent net profit margin over the years i.e. approximately 23%. This was possible only because of appropriate operational methodology followed by TISCO
• JSW had maintained a lower Net Profit Margin Ratio of 14% as compared to the other players. This signifies that company’s return on sale is quiet less and the company might not take the advantage of economies of scale as the sales are comparatively low.

2. Asset Turnover Ratio- It compares the turnover with the assets that the business has used to generate that turnover.

• SAIL had utilised its asset well. It was 1.03% in 2005 which increased to 1.16% in 2007.
• TISCO had properly utilised its assets to generate sales. Their ratio is almost equal to the Sales ratio.
• JSW had the lowest asset turnover ratio among the three players. It was 0.88% in 2005 which decreased to 0.81% in 2007.

3. Return on Net Worth (RONW)

All the three major players has shown the same trend and given maximum return in 2005 and then gradually decreased till 2007. But SAIL had given the maximum return out of the 3 players in all the years. So we can conclude that SAIL had utilised the shareholder funds to the optimum level.

Others Parameters

In the above three major players SAIL is the market leader with the maximum sales of around 40000 crore in 2007, then comes TISCO with the sales of 20000 crore approximately and then comes JSW Steel with around 10000 crore sales.

If we look at the profit earned by companies then TISCO had given the highest return over the years, followed by SAIL and then JSW Steel.

All the major players are on expansion mode, trying to take advantage of booming Indian economy. As India’s steel consumption is going to increase to 65 million tonne by FY09-10. So companies are trying to keep more of liquid reserve and lower debt equity ratio, so that they can easily obtain as and when required.

Compiler

A compiler is a special program that processes statements written in a particular programming language and turns them into machine language or “code” that a computer’s processor uses. Typically, a programmer writes language statements in a language such as Pascal or C one line at a time using an editor. The file that is created contains what are called the source statements. The programmer then runs the appropriate language compiler, specifying the name of the file that contains the source statements.

Towards the end of the 1950s, machine-independent programming languages were first proposed. Subsequently, several experimental compilers were developed. The first compiler was written by Grace Hopper, in 1952, for the A-0 programming language. The FORTRAN team led by John Backus at IBM is generally credited as having introduced the first complete compiler, in 1957. COBOL was an early language to be compiled on multiple architectures, in 1960.

A-0, however, was the only single-pass compiler built. Hopper believed A-0 should be a one-pass compiler. The information defining a problem came from one tape unit and the program was written on another because UNIVAC I had only 1,000 words of storage, leaving little room for anything but the basic steps of the compiling process.

Praxis Business School

Project No. 1

Financial Analysis of Shoppers Stop

A report

Submitted to

Prof. Uday Damodaran

In partial fulfillment of the requirements of the course

Financial Management

On 15-02-08

By

Amit Kumar- B07005

Anupam Agrawal- B07008

Shashank Vyas- B07038

Investment highlights

o Aggressive store rollout

SSL has set for itself an aggressive retail expansion target of rolling out 79 stores from the current 60, across its various store formats by FY09. It had raised Rs.1528m from its IPO to part fund this expansion. This expansion will mark the entry of the company into Tier II cities like Pune and Ghaziabad and also its foray into the bell weather value-retailing segment with hyper city. The store rollout will broaden the company’s target customer group and widen its presence across retailing formats.

o Diversification of business to add value

SSL’s initiative to expand into different retail formats like hypermarkets and specialty stores in addition to its departmental store business will add significant value to the company. Though the revenue contribution from these new formats will be small in comparison to the existing business we expect the new divisions to add close to 30% to the profits of the company from FY07.

o Strong loyalty base

SSL has one of the most successful loyalty programmes, which has resulted in its First Citizen member’s base increasing to 644,500, in Q1FY07 from around 400,000 in FY05. Their contribution to sales has seen an upward spike from 50% in FY05 to 63%. This loyalty group gives SSL a competitive advantage in terms of repeat business.

o The organized retail advantage

The Indian domestic market has become an economic powerhouse with its large young working population, burgeoning disposable income levels, and emerging opportunities in the services sector.

Going forward, organized retailing is projected to grow at the rate of 25-30% and is estimated to reach an astounding Rs.1, 000 bn by 2010

Financial Highlights

Asset Turnover ratio (%) 2.15 2.03 2.75 2.88 -

Company is making good profits over the years; its interest coverage ratio has improved, they are in good position to pay off their interest expenses. Its return on capital is more than its cost of capital; also it is more than the industry returns.

Its return on net worth has decreased significantly over the period as they had opened few new stores across India but they had not able to reap profit out of it due to which their profit reduced over the last year but still they managed to get better profit than its competitors.

If we look at the asset turnover ratio, company has not properly utilised its asset over the years, as pantaloons and other player in the industry has asset turnover ratio of around 4- 5%.

Value Creation of Shoppers Stop

RONW

Company has not created value as its Cost of Equity is more than RONW. This was one way of finding whether they had created value or not. Let see if other method will help us to find if company had created value.

WACC

ROCE

Company has created value as its ROCE is more than WACC. We had taken market value of the equity and calculated debt ratio with it for the calculation of ratio with debt.

EVA shows the true economic profit of a corporation. These are EVA of the company for the year 2006 and 2007. So the company had created value in both the years. It was less in 2007 because of low ROCE. Here ROCE has been calculated by using PBIT with capital employed. Here opportunity cost of capital is less then returns of the business.

Competition Analysis

Strategies Adopted Over Time By Shoppers’ Stop To Tackle Competition:

I) Market has changed: marketing has not

Fortunately the principles behind building bonds with the customer have not really changed. The way to the customer’s mind (and therefore his wallet) and the dynamics of maintaining the novelty in a relationship have definitely changed and changed rather irrevocably. However, the basic tenets of identifying a customer and making him feel special have remained the same thus providing some continuity to the ‘old school of marketing’. What are these basic rules or guidelines which could provide some comfort to the brand manager on this perilous journey to the land of loyalty?

Rule No 1: Know thy customer!

Rule No 2: Divide and Lure (with apologies to the British Empire!)

Rule No 2.1: Pamper the best:

Rule No 2.2: Honour the rest

Rule No 3: Reward do build loyalty!

Rule No 4: Show that you care:

Rule No 5: Designing products to make their customer’s life better:

Rule No 6: Don’t look now; the customer is changing

Rule No 7: Put the customer in charge

SWOT analysis

For assessing the advantages and disadvantages shopper stop enjoys as compared to its peers we have gone in to SWOT analysis of the company.

STRENGHTS:

o Pioneer in departmental format.

o Loyal customer base accounts for 63% of revenue.

o Low risk and sturdy business model.

o Presence across retail segments; lifestyle, value and specialty retailing.

o Healthy financial position with low gearing.

o Low rentals due to long lease contracts.

WEAKNESS:

o Late foray into value retailing with 51% stake in promoter owned company.

o High spend on store makeovers and interiors to ensure pleasant shopping experience.

o Competition from standalone specialty stores.

OPPURTUNITY:

o 30% CAGR in organized retailing to result in better footfalls and conversion rates.

o Entry into TIER II and III cities.

o Benefit from the 16% increase in discretionary spend in Indian consumers because of presence across formats.

o Collaborations with foreign players because of a national brand.

THREATS:

o Impact of slowdown in consumer spends to be felt on department stores.

o Opening up of economy for free entry of foreign retail players.

o Employee shortage due to rapid growth in retailing.

Volatility of SALES

As we can see % of sales was dropping till 2006 but after that company seems to be more stable and less risky.

Revenue of the company is increasing over the years. This signifies that company is trying to increase their market share and with the increasing consumption. It sales has increased very steeply over the years.

EBIT

Same is the case with EBIT, it is also volatile and showing a decreasing pattern over the years.

In qualitative terms their EBIT is increasing over the years, due to increase in turnover over the years.

Equity risk

Equity risk is the risk that one’s investments will depreciate because of stock market dynamics causing one to lose money.

The measure of risk used in the equity markets is typically the standard deviation of a security’s price over a number of periods. The standard deviation will delineate the normal fluctuations one can expect in that particular security above and below the mean, or average.

Equity risk is very high as its standard deviation is very high. It is not a stable stock. But the stock is getting stable as its standard deviation is reducing over the years.

Operating Leverage

EBIT’s percentage change as a result of a change of one percent in the level of output is low. Company’s fixed asset is increasing over the years whereas sales remain at the same level.

Financial leverage

In finance, leverage is the general term used to describe the ratio between an investor’s market exposures to borrowed funds.

The higher a firm’s financial leverage, the riskier the firm’s operations are considered to be. The most typical system of determining an acceptable level of financial leverage is by comparing operations to others firms in the same industry.

Because a firm must continue to make payments on debt no matter what the business climate, firms with higher leverage are generally considered more susceptible to economic downturns. But financial leverage may also increase an investor’s returns. Lower leverages suggest financial leeway that may sustain operations when business turns.

Degree of financial leverage = % ∆ in EPS / % ∆ in EBIT

Company is low leveraged as they had taken very low loans. In 2007 company’s EBIT reduced also interest payment marginally increased, so same effect was on EPS.

Finally company has high DOL AND low DFL.

Capital structure of the company

If we look at the debt equity ratio of the company from last 5 years, they had maintained it at a very low level as compare to its competitors.

This clearly indicates that company keeps more equity in all the 5 years and low debt. It helps company lower down their interest expenses and improves their interest coverage ratio. For getting a competitive edge over its competitors in retail industry, company lower its expenses and increase their cash flow.

Shoppers Stop Finance Committee

o Ravi C. Raheja – Chairman

o Neel C. Raheja – Member

o B.S. Nagesh – Member

Bankers

o UTI Bank Limited

o Citibank N.A.

o IDBI Bank Limited

o ICICI Bank Limited

o Kotak Mahindra Bank Limited

o The Hongkong and Shanghai Banking Corporation Limited

o Calyon Bank

These are the bankers who help company to finance its operation. So company has good support and tie up with major bank of India.

Company has a strong and well-established management team, headed by B S Nagesh, Managing Director. They believe that the CEOs of each business under the guidance of the MD will be the key to successful execution and expansion, and strong business growth.

This clearly indicates the company share distribution across the globe. It will be every easy for the company to raise funds. Strong holding of the Banks and FII’s shows the growth prospect of the company.

Future Estimated Growth Funding

Company can easily manage its funds. Issue of instrument(s) on a rights basis which may include but not limited to shares/ Partly Convertible Debentures/ Fully Convertible Debentures/ Warrants and/or combination thereof for up to an aggregate amount of about Rs. 500 crore and has constituted and authorized a Committee of Directors of the Board to decide inter-alia the modalities of the proposed rights issue including but not limited to determining the price of instrument(s), the proportion and entitlement ratio, the timing and including record date of the issue.

Also Rs. 951.09 million has been kept in fixed deposits with banks pending utilisation.

Company’s debt / equity ratio is very low as compare to other players in the industry. If we look at pantaloons debt/ equity ratio, it was 1.14 on June 2006. So company can any time raise funds from the market for its future expansion. Its promoters Raheja Group and their contact with major bank of India will easily avail those funds for estimated growth.

Operating Efficiency

Company has been performing well. They had maintained their ratios best in the industry. Let’s look at the various ratio of the company and find out whether they had managed it well or not?

o Debtor’s turnover ratio: Company has maintained its debtors at low level. It was 2 from last 5 years and now it’s 3. Company is rotating its money well which will generate higher cash flow. Usually most of their transaction is cash payments, only credit card payment leads to delay in payment.

o Creditor’s turnover: Company has been paying their debt in lag of around 55 days. As we had seen in debtor’s ratio company is receiving its money very fast whereas they are making payment late, this will lead company to maintain better working capital as well as rotate their money faster.

o Stock turnover ratio: Company has implemented various measures to lower down their inventory carrying cost. Shrinkage in the retail business is defined as the loss in inventory through a combination of shop lifting, pilferage, and errors in documentation and transaction processing that go unnoticed. They have focus on inventory control and have set up a separate department called “Profit Enhancement”, which not only monitors Shrinkage on a regular basis but also looks at various factors that could lead to Shrinkage at stores and distribution centres. The Profit Enhancement department, Store Operations along with the Supply Chain team have worked together and monitored the Shrinkage level on a month on month basis which has resulted in the Shrinkage percentage being controlled at 0.46% of the Turnover and our endeavour will always be to lower this ratio through proper monitoring and continuously reviewing Inventory management processes and systems.

o Current ratio: Company had maintained their current ratio at around 3 i.e. they want to keep more of liquid cash with them. Mostly their current ratio blocks at the merchandise which they keep in store and stock in warehouse. Industry standard is 2:1, whereas company had maintained it at 3. Maintaining working capital requirement efficiently is very important in retail business because of the sudden requirement of the cash.

o Operating cash flow, usually more formally described in accounts as “cash inflow from operating activities”, is the amount of actual cash made by a company’s business. It is similar to operating profit but without the non-cash items and accruals.

o Reason for such a low operating cash flow on 06-07 is due higher working capital balance and purchase of fixed asset. Company’s inventory is also high at the yearend due to which its operating cash flow is low.

o Free cash flow is operating cash flows (net income plus amortization and depreciation) minus capital expenditures and dividends. Free cash flow is the amount of cash that a company has left over after it has paid all of its expenses, including investments. Negative free cash flow is not necessarily an indication of a bad company. But in our case company had maintained good free cash flows as working capital requirement is high in retail industry.

Growth Redefined

Shopper’s Stop Ltd. has achieved unparalleled growth to emerge as a competent, strong and dependable organisation. It has spread its equity and ability across a gamut of retail formats by leveraging synergies, specialties and strengths of each business to maximise growth not just within the organisation, but also in the country’s retail sector.

The company’s flagship business of department stores is manifest in Shoppers’ Stop. A pioneer of organized retail in India, Shoppers’ Stop today, is the country’s biggest Department Store Chain. It offers customers an international shopping environment and a world-class shopping experience through its 20 stores in 11 cities. It houses a host of international and domestic brands across categories such as apparel, accessories, cosmetics, home & kitchenware as also its own private brands.

Company continues with various initiatives for bringing down the cost of borrowings which includes application of new dynamic short term instruments so as to have an increase in cash flow, reducing interest cost and improving working capital management.

The growth of the Company has been financed largely through cash generated from operations and IPO proceeds. The cash generated was

Rs. 436.26 million (Excluding payment of long-term lease deposit of Rs. 240.22 million) and cash flow from financing activities was Rs 493.26 million. Fitch Ratings India Pvt. Ltd. has assigned a rating of “F1+ (Ind)” to the Company for short-term debt/commercial paper.

Future Redefined

The time yet to come for Shopper’s Stop Ltd. will be an aggregate of the firm foundation and futuristic foresight that will empower the company to reinforce its offerings to the affluent middle class in India. The future will be a time when Shopper’s Stop Ltd. will evolve as the one name that stands for premium and luxury value for shoppers all over the world.

Bibliography:

o www.shoppersstop.com

o www.nse-india.com

o www.wikipedia.com

o www.myiris.com

o www.moneycontrol.com

o www.geojit.com

o www.bseindia.com

o www.investopedia.com

(B)

These are the list of steps which one follows to make their own database and manage your operation in an instant through SQL.
1) You need to log on to db.zoho.com where you have to make 1 user id. Here you can face problem if you are using internet explorer, as it is a Microsoft product it might not support zoho operation. So it is preferable to use Mozila.
2) After making your id, log on and then make database which you can give any name.
3) Then you need to make few tables which you can upload from excel or any other place. If you have your data in excel, you can directly upload that data in your database else you have to enter it. You just need to select Import from excel….
4) It’s so easy; you are now done with your formulation of database without any cost and loss of time. Your all data is now on web which you can access from anywhere.
5) All major work is done. Now you will get all data in your own pattern of arrangement, you just need to enter a query by selecting it from new option which is mentioned at the top of the above produced table.
6) One example will be given to you, when you will open that page. Here you just need to type your query in that particular manner according to your requirement and you will get all data in arranged pattern. There is an option at the side of that page which will help you in making query. It has all functions as well as table content. It is very user friendly; it will take some time to understand on passing the query but after that wow……
7) These were simple, but remember after making your query doesn’t forget to save it for your future reference. Also after making each query, open a new query from new option at the top.
Over- yes it’s done. You had made your own database in few hours and that too free. Isn’t it great? So go ahead and make your database now.

Here are the few example of query which you can refer:

(A)
http://db.zoho.com:80/ZDBDataSheetView.cc?OBJID=23843000000005189&STANDALONE=true
http://db.zoho.com:80/ZDBDataSheetView.cc?OBJID=23843000000005112&STANDALONE=true
http://db.zoho.com:80/ZDBDataSheetView.cc?OBJID=23843000000005021&STANDALONE=true

Data Normalization is a process in which data attributes within a data model are organized to increase the cohesion of entity types.  In other words, the goal of data normalization is to reduce and even eliminate data redundancy, an important consideration for application developers because it is incredibly difficult to stores objects in a relational database that maintains the same information in several places.In case of library there are various data attributes which need to be organised in a proper order which will make its function easy and understandable.  An Initial Data Schema for Library 

    A Normalized schema in 3NF 

SYSTEM

ARCHITECTURE

IN DAILOGUE FORMAT

SCENE DESCRIPTION:

It was 11 in the night when I called up my friend, he was planning to sleep. I told him about an IT topic and he was suddenly anxious to know more about it. This was how communication started.

ME: I am going teach you about an IT topic i.e. System Architecture. It is very interesting topic and you will be able to relate it to your life.

KUNA: That sounds good. Let see how much I will able to understand.

ME: Please stop me wherever you have any doubt. Feel free to ask all questions and clarify all your doubts.

So let start the topic, what are the 2 things which you require to do any operation?

KUNA: Intelligence….

ME: Yes but basic things you require are Data and a process to analyse those data. So in IT terms we can use Database for data and Application (software) for process. So are you clear till now?

KUNA: Yes, in IT Terms database and application are used to do routine operations.

ME: Now I will make you understand about the architecture which we use in our routine life. It has 3 different architectures. According to the usage, the entire three tiers are used.

1. Single tier: it is used at the individual level where data is stored in your laptop. Here they have both data and application in your laptop, you can access that data and directly used in your laptop.

2. 2 tier architecture: In this there are multi users. So all the user requires data which in this case can be stored in the server and all the users are connected to it. They can directly access those data and analyse them by using application which is available in your laptop.

KUNA: Hey can you give some example of 2 tier architecture.

Me: like in praxis B – school, they are many users which are directly connected to the server. Here if data would have stored in laptop then other people might had not got that data.

1. 3 tier architecture: This is used for big organisation where there are many users spread over vast area. Here data and application are there in database, which is usually used by all the departments across India. Here users are not very comfortable with IT technology, so application is defined in upper level. Here WAN (wide area network) and Internet can be used for transfer of information. Using internet is inexpensive, whereas WAN is more secure network.

Hope you had understood till now.

KUNA: yes it’s really great.

ME: Now I will take you into deep in this topic. As you know there are various departments in an organisation. Earlier all the data from different department were used to be stored in different database, due to which data was not widely available across organisation.

Presently, a corporate database is used to store data from different departments. Here many back ups are kept of corporate database for making it safe, in case of database failure. It will enable them to reduce redundancy and improve efficiency.

Are you getting all the concepts?

KUNA: ok that means 1 database is used to access data across India. This all is for a large organisation.

ME: Yes you are right. Now let’s find implication of a standard application system in place. If we install ERP in an organisation, its application formation work will not be there, company will be able to concentrate on its core competency. ERP will give a standard application for all the departments, which will make its user life easy. It is cost effective as well as time saving.

All the organisations have ERP in place along with a corporate database, which enable them access information across their vast area and in a profitable manner.

KUNA: That was great. Can you tell me something about ERP?

ME: Various companies like SAP, ORACLE etc offer ERP. It is available for all type of organisation. According to the operations of the company and users, company can choose ERP package.

This was all I had to explain you. If you have any doubt, feel free to ask.

KUNA: Thanks, I understood entire topic and enjoyed learning it.