Porter'S Five Forces Model Analysis of Grasim Industries

PORTER’S FIVE FORCES MODEL ANALYSIS OF GRASIM INDUSTRIES
Established in 1947, Grasim industries limited has shown remarkable business growth both
vertically and horizontally. It has grabbed opportunities to emerge as one of the industrial
giants in India.
Grasim Industries limited, a part of Aditya Birla group ranks among India’s largest private
sector companies. It had a consolidated net profit of Rs 37 Billion in year 2018.The group’s
business are spread across a plethora of industries. These include aluminium, copper
,cement ,textiles carbon black, insulators, natural resources, power, agribusiness,
telecommunications, financial services, retail and trading.
It is leading global player in Viscose Staple Fibre and it is the largest producer of cement in
India through subsidiary Ultratech cement. It is also the largest caustic soda producer in
country.
Mostly famous for its textile manufacturing Grasim does its production under a subsidiary
Jaya Shree Textiles. It is India's top linen brand manufacturing company. A leading player in
the domestic linen and worsted yarn segment, the company has significantly revolutionised
the Indian textile market by popularising linen in India across a wide customer base with its
brand "Linen Club".
Indian textile industry is one of the largest in India. It is the second largest Industry in terms
of providing opportunities in the country. Indian Textile industry contributes to 7 per cent of
industrial output in terms of value, 2 per cent of India's GDP and to 15 per cent of country's
export earnings. he size of India's textile and apparel market recorded USD 108.5 billion in
2015 and is expected to reach USD 226 billion by 2019, growing at a CAGR of 8.7 per cent
between 2009 and 2023.Here we are analysing the sector’s dynamics through Porter’s five
forces model.
Bargaining power of buyers:
There is a very High Demand for apparels both in Home and European -American
Markets .India's overall textile exports during FY 2017-18 stood at US$ 39.2 billion. The
Indian textiles industry, currently estimated at around US$ 150 billion, is expected to reach
US$ 250 billion by 2019. India, in particular, is likely to benefit from the rising demand in the
home textiles and apparels segment, wherein it has competitive edge against its neighbour.
Bargaining power of suppliers:

India is the third largest producer of cotton in the world after China and US and has the
largest area under cultivation. Cotton, a key raw material in the textile and garment
industry, accounts for about 30% of the fabric cost and 13% of the garment cost. India has
an abundant supply of locally grown long staple cotton, which lends it a cost advantage in
the home textile and apparels segments. Also low cotton prices due to a bumper cotton
crop would enable India to lower its production cost and sustain pricing pressure. india also
enjoys a significant lead in terms of labour cost per hour over developed countries like US
and newly industrialised economies like Hong Kong , Taiwan, South Korea and China. Also,
India is rich in traditional workers adept at value-adding tasks, which could give Indian
companies significant margin advantage.
Threat of new entrants:

Since there are no entry barriers , capacity expansion is common in the textile sector. Which
results into, smaller players who cannot venture into the global markets are flooding the
domestic markets with excess supply, thus weakening the pricing scenario. Be it denim
home textiles or branded apparels ,new capex and consolidation with international players
is also not likely to safeguard margins for the larger players, unless they can tap a significant
pie of the overseas markets.
Threat of substitutes:
Low cost products from other nations such as Pakistan, Bangladesh, Vietnam, China are
Hurting the Industry. Low cost producing countries like Pakistan and Bangladesh (labour
cost 50% cheaper) are also posing a threat to India's exports demand. Infact, domestic
players have started feeling the pinch as overseas buyers have started shifting to 'alternative
sources'.
Competitive Rivalry:
It is a very cluttered market consisting big players like Bombay Rayon Fashions, JCT Limited,
Raymond Ltd, Lakshmi Mills, Fab INDIA, Vardhman, Sutlej. Also this industry is in continuous
battle with new domestic rivals.
The geographical location gives India a logistical disadvantage. The country is distant from
its major global market rivals as compared to Turkey,Mexico and China which are located
near to European and American Markets.
Cement
Grasim ventured into cement production in the mid-1980s, setting up its first plant at Jawad
in Madhya Pradesh. The Cement business was consolidated with subsidiary UltraTech on
July 1, 2010.
UltraTech Cement Ltd. is the largest manufacturer of grey cement, Ready Mix Concrete
(RMC) and white cement in India. It is also one of the leading cement producers globally.
UltraTech as a brand embodies 'strength', 'reliability' and 'innovation'.
Buyer Power:
The buyer power is low because the majority of buyers are bulk buyers eg.big construction
firms,corporates who wants to build their offices.Pure buyer power exists when there is only
one buyer in the market but in cement industry this effect is minimal.The power of buyer is
limited due to lack of substitues,the small number of cement firms, and the demand
consumers have for the product.
Supplier power:
Suppliers exert a very high power as raw materials forms very large part of the process in
the manufacturing of cement. But since all the raw materials are natural resources they are
under government control. Hence supplier power is moderate.
Barriers to entry:
High capital investment ,broad distribution network and overs supplied markets hinder new
entrants. High costs and long gestation period makes it difficult for new entries.
Inter firm rivalry:

Many players in this industry are large scale industry with huge capital invested in setting up
the production units which results into high exit barrier. Also the differentiation in the
product is marginal .Large number of players, intermittent overcapacity ,high storage cost
has led to stiff competition in industry. Big players consists of Ultratech, Ambuja, ACC ,Binani
,Shree ,JP.
Threat of substitutes:
There is no threat of substitutes. No product exists that can effectively substitute cement in
India.
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PORTER’S FIVE FORCES MODEL ANALYSIS OF GRASIM INDUSTRIES

Bargaining power of suppliers:

Threat of new entrants:

Inter firm rivalry:

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