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EXECUTIVE SUMMARY

Today, cera sanitaryware ltd is considered as one of the pioneers in


the sanitaryware segment in India. It is now the third largest
company in the organized sector with over 20% market share.
Incidentally, it is also the largest and only listed company in pure
sanitaryware space.

To maintain the edge in the market, cera keeps upgrading and


increasing its product portfolio regularly. Moreover, it enjoys a
strong distribution network of 500 dealers and 5000 retailers.
CERA has production capacity 1.3mn pieces but they are
upgrading it to 2.2 mn pieces.

It is never easy to reach top position and it’s more difficult to


maintain or improve on that position. You need to constantly
innovate and add value. CERA is doing that by realizing that it is
available up to the premium segment and thus they felt to have
their presence in luxury segment too. To achieve this CERA has
tied-up with Pozzi –Ginori, an Italian designer Sanitaryware which
is part of Sanitec Group, the European Sanitaryware Leader.

In fact, sanitation is major issue in our country. And it would not


be wrong to say that sanitaryware industry is in a way of
promoting proper sanitation. Government is treating sanitaryware

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as a luxury product. Our stand has been that basic sanitaryware is
not a luxury product, but a utility product for the common man.
Even after 60 years of independence, there is almost 40% of
population, which is in need of access to proper sanitation
facilities. The government policy of not treating sanitaryware as a
luxury product by reducing excise duty can go a long way in
promoting sanitation. A lot of diseases are spread due to improper
sanitation. Thus. Proper sanitation in turn can help government
save on its health related spends.

The Company's principal activities are to manufacture and sell


sanitaryware and glazed tiles. The Company product includes
ceramic sinks, wash basins, wash basin pedestals, baths, bidets,
water closet pans, flushing cisterns, urinals and similar sanitary
fixtures.

The growth of Ceramic/Sanitaryware industry entirely depends on


allied sectors like housing/real estate, Government quadrilateral
projects, N-E-W-S-Corridor all performing well ahead and is
expected to post a healthy growth in 2004-05. The restoration of
natural gas and recent new gas finds would also bring cheer to the
industry players and R-LNG would play a vital role in reducing the
fuel cost.

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China has the world’s biggest bathroom equipment and taps and
mixers market by volume followed by the US with Brazil in third.
One surprising feature about the world market is that despite India
having a population of over 1 billion people it actually has the
smallest baths market of the 22 countries covered with just under
16,000 units sold in 2002.

Here the study is made of the financial Analysis, the marketing


management how the marketing is done in order to achieve the
organizational goals and objectives, the study is done on
recruitment procedure followed by the CERA and how they
maintain them. This report describes about the types of services
provided by the CERA and their benefit on the part of the CERA
which type of additional benefits they provides to their customers
in order to maintain them and attract them to invest more and more
with Cera. In this report it is described about the CERA as whole
and is analysis is done according to its information collected like
Porter Analysis, PEST Analysis, SWOT Analysis and GE Models,
which helps in formulation of strategies of the company.

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SECTION B
RESEARCH METHODOLOGY

OBJECTIVES AND SCOPE OF THE PROJECT:

As we know in the Indian Economy the ceramics industry is one of


the fastest growing industries and the growth in highly due to
sanitary segment, whose prospect is reflective of the economic
resilience.

The Major Objectives of the Study:


1. To understand the basic functional areas and their respective
functions.
2. To evaluate the company’s performance in overall industry
growth.
3. To measure individual functional areas in the company’s
performance.
4. to know the effect of various political, social, economical and
technological factors

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Sources of data:
Data collected for study was primary as well as secondary data.

Research instrument:
Research tools were in depth interview of company employee.

Sample unit:
Data collection from various departmental heads including
manager and executive.

Sampling procedure:
Non probability judgment sample was selected for accurate
information.

Contact method:
Here we have conducted personal interview for data collection.

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HISTORY OF SANITARYWARE:

Unlike body functions like dance, drama and songs, defecation is


considered very lowly. As a result very few scholars documented
precisely the toilet habits of our predecessors. The Nobel Prize
winner for Medicine (1913) Charles Richet attributes this silence
to the disgust that arises from noxiousness and lack of usefulness
of human waste. Others point out that as sex organs are the same
or nearer to the organs of defecation, these who dared to write on
toilet habits were dubbed either as erotic or as vulgar and, thus,
despised in academic and social circles. It was true for example of
Urdu poets in India, English poets in Britain and French poets in
France. However, as the need to defecate is irrepressible, so were
some writers who despite social as well as academic stigma wrote
on the subject and gave us at least an idea in regard to toilet habits
of human beings. Based on this rudimentary information, one can
say that development in civilization and sanitation have been
coterminous. The more developed was the society, the more
sanitized it became and vice versa.

Toilet is part of history of human hygiene which is a critical


chapter in the history of human civilization and which cannot be
isolated to be accorded unimportant position in history. Toilet is a

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critical link between order and disorder and between good and bad
environment.

In our own country i.e. India, how can any one ignore the subject
of toilet when the society is faced with human excretions of the
order of 900 million liters of urine and 135 million kilograms of
faucal matter per day with totally inadequate system of its
collection and disposal. The society, thus, has a constant threat of
health hazards and epidemics. As many as 600 out of 900 million
people do open defecation. Sewerage facilities are available to no
more than 30 per cent of population in urban areas and only 3 per
cent of rural population has access to pour flush latrines.

Seeing this challenge, we think the subject of toilet is as important


if not more as other social challenges like literacy, poverty,
education and employment. Rather subject of toilet is more
important because lack of excremental hygiene is a national health
hazard while in other problems the implications are relatively
closer to only those who suffer from unemployment, illiteracy and
poverty. Thus the study of the history of toilet is an important
subject matter.

As long as man did not have an established abode, he did not have
a toilet. He excreted wherever he felt like doing so . When he
learnt to have a fixed house, he moved toilet to courtyard and then

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within his home. Once this was done, it became a challenge to deal
with smell and the need was felt to have a toilet which can intake
human wastes and dispose these out of the house instantly and,
thus, help maintain cleanliness. Man tried various ways to do so
i.e. chamber pots, which were cleaned manually by the servants or
slaves, toilets protruding out of the top floor of the house or the
castle and disposal of wastes in the river below, or common toilets
with holes on the top and flowing river or stream underneath or
just enter the river or stream and dispose of the waste of the human
body. While the rich used luxurious toilet chairs or cross stools, the
poor defecated on the roads, in the jungle or straight into the river.

It was only in the 16th century that a technology breakthrough


came about and which helped the human beings to have clean
toilets in houses. This breakthrough did not come about easily and
human race had to live in sanitary conditions for thousands of
years.

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INDIAN CERAMIC INDUSTRY: A FUTURISTIC VIEW

Ceramic industry is generally classified into the following major


groups:

a. Ceramic sanitaryware
b. Ceramic tiles for wall, floor and facing
c. Ceramic insulators
d. Refractory, common bricks and clay pipes;
e. Ceramic table ware
f. Glass-ware;
g. Cement, lime, dolomite and gypsum products;
h. Abrasives.

Indian Ceramic Industry can emerge as a major


manufacturer/supplier in the global market. It has an annual output
of 8.5 lakh metric tons. Advanced Ceramics manufacture has also
been embarked upon. Progress in the White ware Ceramics market
has been impressive, with the induction of advanced technology.
However, the Tableware sector has lagged. The Sanitaryware, Tiles
and Insulators sectors have successfully negotiated the transition
from sheltered to global economy and has accounted for US$
47.39 million positive export import balance in the year 1996-97.
The fast globalization process will no longer protect the Indian
industry and the unorganized small-scale sectors need to gear up

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for the changes. There exist many constraints including high fuel
costs.

Exports have steadily increased over the years but the present
sluggishness in the market and the recent currency crisis may
induce a marginal decline. Porcelain Electrical Insulators have
maintained a rising growth curve from the beginning and have
played a major role in the export turnover. Bulk of the exports is
being absorbed in Asia and Africa, with increasing acceptance in
the industrialized West. Insulators are in great demand in Asia,
Africa and West Europe. Tiles and Sanitarywares are being
exported to Asia, Africa and USA. Pottery wares find a market
mostly in America and Europe. The global demand of ceramic is
chiefly in Tiles, followed by Tableware, Art ware, ceramic
products, Sanitaryware, Insulators and technical ceramics. There
has been steady shift of industry and technology from the

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developed to the developing world. India, being a slow starter is
presently ranked seventh in terms of exports. China has emerged
as a market leader in the ceramics field. India is expected to profit
from the shift of production base.

Despite substantial increase in exports, India continues to enjoy


negligible market presence. In view of the recent progress, Indian
exports are projected to rise by 2000-01. The Tile industry is
expected to double with the support of technological inputs.
Sanitaryware, with lesser production charges, is growing at an
average of 10% p.a. Insulator Industry having met expected quality
standards is also projected to make considerable progress. Pottery
ware and Art ware can make substantial progress with the
induction of advanced technology.

The Indian Ceramic Industry faces unprecedented opportunities.


These must be translated into achievements to make India a major
ceramic industry center.

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Ceramic Industry
Ceramic Industry in India is about 100 years old. It comprises
ceramic tiles, sanitaryware and crockery items. Ceramic products
are manufactured both in the large and small-scale sector with
wide variation in type, size, quality and standard. India ranks 7th
in the world in term of production of ceramic tiles and produced
200 million sq. meters of ceramic tiles, out of a global production
of 6400 million sq. meters during 2003-04. State-of-the-art
ceramic goods are being manufactured in the country and the
technology adopted by the Indian ceramic Industry is of
international standard.

Capacity and Production


There are, at present, 16 units in the organized sector with an
installed capacity of 21 lakh MT. It accounts for about 2.5% of
world ceramic tile production Ceramic tiles industry has been
growing at about 12% per annum. In India, per capita consumption
of ceramic tile is 0.15 sq. meter. Per annum compared with 2 sq.
meters Per annum in China and 5-6 sq. meter. Per annum in
European countries. With the growth in the housing sector the
demand of ceramic is expected to increase. Indian tiles are
competitive in the international market. These are exported to East
and West Asian countries. The exports during 2003-04 were about

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Rs. 180 crore.
Sanitaryware is manufactured both in the large and small sector
with variations in type, range, quality and standard. At present
there are 7 units with capacity of 86,500 tonne per annum and,
there are about 200 plants with a capacity of 50,000 tonne per
annum in small scale sector. The industry has a turn over of Rs.
400-500 crore. This industry has been growing at the rate of about
5% per annum during the last 2 years. There is significant export
potential for sanitaryware. These are presently being exported to
East and West Asia, Africa, Europe and Canada. The exports were
of the order of Rs.60 crore during 2003-04.

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SANITARYWARE INDUSTRY IN INDIA:

India is a large, highly populated Country of around one billion


people, with an economy, which is steadily growing. As per the
study, there were an estimated 125 million dwellings in India
(1995), but 200 million households. This reveals an acute housing
shortage. The U.N. predicts an increase in the population of 1.6%
per annum. There is a gradual migrant shift from rural to urban
areas and 27% of the population now lives in urban areas as
compared to 20% in 1971. There is a large difference in amenities
between the urban population and the rural. In 1994, 70% of the
urban population had access to adequate sanitation, whereas in the
rural community only 14% had access.

In 1991, approximately 64% of urban households had some kind


of toilet facility compared with 9% of the rural areas. There is a
widening difference in income between different regions, the rich
and the poor.

Sanitation is a must for every individual of our society. According


to the Government estimates, more than 50% of the urban
population does not access to sanitation facilities. Condition of the
rural areas abysmal that only 6% of the populations are covered by
sanitation.

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Population Covered by Sanitation Facilities
1985 1990 1997
Rural 0.7 2.4 6.4
Urban 28.4 45.9 49.3

Sanitaryware demand:

Sanitaryware Industries in India for the last 6-7 years has shown
very dramatic growth with major players doubling their production
capacity. The Companies have also upgraded their manufacturing
system by introducing Battery Casting, Beam Casting and have
gone in for latest imported Fast Firing Cycle Kiln Technology.
These Companies have also upgraded their quality and have
introduced high value range in the market, which has been
accepted and appreciated. The demand for high value sanitaryware
in India is growing very fast. The Companies are trying to meet the
demand as the realization per Metric Ton for high value product is
very good which ultimately results in good profitability. In order to
educate the customers in India to go for quality products and also
for higher value sanitarywares, companies have adopted a very
aggressive advertisement campaign. Companies have also
strengthened their dealer network by offering showroom incentives
and some of the companies have also gone for their own retail

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outlets in major towns. The demand for sanitarywares in India is
growing @ 15% -17% every year.

The sanitaryware industry in India is divided in two sectors. The


organized sector consisting of 5 companies (M/s. Hindustan
Sanitary Industries Limited, M/s. E.I.D. Parry, M/s. Swastik
Sanitarywares Limited, M/s. Madhusudan Ceramics, M/s. Neycer
India Limited), manufacturing sanitaryware for the last 15-20
years and have established their Brand image. The organized
sectors produce fully vitrified sanitarywares, using latest
technology and best of Ceramic Raw Materials available in India.
The unorganized sectors have adopted local Indian technology to
manufacture the basic sanitaryware products. Since the availability
of raw material is in abundance and also very cheap in the state of
Gujarat & Rajasthan, various companies have established their
factory in these areas. They are producing the basic sanitaryware
in various brands. Unorganized sector's percentage of production
capacity and also their sales in the local domestic market are
higher than that of the organized sectors' sales. Unorganized
sanitaryware manufacturer comes under small sectors and hence
enjoy the benefit of Nil Excise Duty and Sales Tax and hence they
sell their products in the domestic market approximately 70%
cheaper than the organized sector products.

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Government of India Policy on Housing Sector is very
encouraging. The Government has announced Income Tax rebate
on housing loan to boost the housing sector. All financial
institutions are lending money for construction of house at a very
low rate of interest. Government figure shows that Housing Sector
is growing by approximately 25% every year. The need of Housing
in India with 100 crores population looks to be very potential. As
per DGTD Survey Report there is a shortage of about 20 million
houses in the country by the end of 8th Five Year Plan. The
housing has become a basic necessity, as people in India are
looking forward for improved sanitary condition. The concept of
making toilet is fast growing even in village areas, where toilet till
last two years did not exist.

The cost of producing sanitaryware in India is substantially low as


compared to the advance countries, because the labour cost and the
basic raw materials for manufacturing quality sanitarywares is
available at very cheap rate and in abundance. Because of our low
cost of production, Indian sanitarywares are very competitive in
the neighboring countries and hence export from India is also
growing everyday.

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Demand Estimates:

The total demand for sanitaryware in India for the organized


manufacturers is at present approximately 80,000 M.T. per annum.
The region wise demand pattern can be estimated as follows:

NORTH SOUTH EAST WEST TOTAL


18,000 32,000 15,000 15,000 80,000

Note: Every year the above demand is expected to grow by 15 to


17%.

Current Market Size:

The Indian Sanitaryware market is worth around 500 crores for the
year 2001-02 with an annual market size of around 8 million
pieces. This represents a yearly growth rate of about 3-4%.

Major players:

Until the mid 1940s the only sanitaryware available in India was
imported mainly from UK and was used only in upper class
residences in major cities. The first Sanitaryware manufactured in
India was by M/s. Parasuram Pottery Works. In the 1960s,
companies like EID Parry, in collaboration with Royal Doulton of
UK and Hindustan Sanitaryware in collaboration with Twyford of

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UK, started production of Vitreous China Sanitaryware. Other
major players who joined the organized sector were Madhusudan
Ceramics and Neyveli Ceramics. In the 1980s, 7-8 other players
had entered the organized sector, but most of them have since been
taken over by the majors.

The large foreign players like American Standard, Toto, Villeroy


and Boch have also set up distribution channels in India.

In addition to the branded products made by the above companies,


there are a large number of small-scale units mainly in Thangad
and Morbi districts of Gujarat.

Concerns:

It has been observed that many sanitaryware manufacturers in the


small-scale sector do not manufacture ceramic sanitaryware to
standard quality norms. Moreover some of these manufacturers use
the word "Vitreous" along with their brand name whereas they do
not meet the water absorption standards and thereby are
misleading the consumers.

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SANITARYWARE INDUSTRY STATISTICS:

1. World production: 187 Million


pieces
2. India's Share: 6.7 Million
Pieces.
3. World ranking (in production): Not in the Top 10
(India A/c for
3.30%)
4. Global Industry Growth Rate: 5-7%
5. Growth Rate (India Domestic Market): 10%
6. Organized sector:
% Share of 43%
Production:
No. of units: 6
Production Capacity: 103300 M.T. per
annum
Actual Production: 95000 M.T. per
annum
7. Unorganized sector:
% Share of 57%
Production:
Production Capacity: 136700 M.T. per
annum
Actual Production: 120000 M.T. per
annum

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INTRODUCTION TO CERA SANITARYWARE LTD

Cera Sanitaryware Limited (CSL) is one of the pioneers in the


sanitaryware segment in India. CSL was founded in the year 1980
as a division of Madhusudan Industries Limited. Realizing the
future growth prospects of this division, in the year 2001,

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management thought it worthwhile to have independent identity by
de-merging and transferring the entire business to a new company.
The new company was named Cera Sanitaryware Limited It is
now the third largest company in the organized sector with over
20% market share. It is also the largest and only listed company in
pure sanitaryware space. CSL is the first sanitaryware company to
use natural gas and the first Indian sanitaryware company to have
ISO 9002 and ISO 14001 certifications for its products.

Launched in 1980, Cera is a pioneer in the sanitaryware segment


in India. The first sanitaryware company to use natural gas, Cera
has been on the forefront of launching a versatile colour range and
introducing the bath suite concept. It also launched innovative
designs and water-saving products. The twin-flush model launched
in India by Cera for the first time, reduces the water needs of
households considerably. WCs designed to flush in just 4 liters of
water is another notable innovation by Cera.

Based in Kadi, Gujarat, Cera Sanitaryware Ltd. uses German


technology, which has ensured CERA’s superiority over others in
quality. Established with an initial capacity of 3,600 MTPA, the
plant has undergone several periodical up gradations and
modernizations to expand to 15,000 MTPA.

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To achieve growth in the rapidly changing retail market in the
country, Cera, has launched its one of a kind Cera Bath Studios in
Ahmedabad, Bangalore, Chandigarh, Kolkata, Cochin and
Hyderabad. With the opening of the Cera Bath Studios, the
discerning consumers architects and interior designers can have
full view of the CERA’s premium ranges of WC’s, Wash Basins,
Shower Panels, Shower Cubicles, Bath Tubs, Shower Temples,
Whirlpools, CP fittings etc. Cera Bath Studios will complement its
existing network of 400 distributors and 4000 retailers. Several
Bathrooms are displayed live, so that the customers can get a feel
of CERA’s vast range of products.

Soon, Cera will also launch premium Spanish Tiles in Indian


market. The company is poised to become a total bathroom
solutions provider.

Having shown a growth rate of more than 20% since last 3 years,
Cera Sanitaryware Ltd. today is the fastest growing sanitaryware
company in India.
PRODUCT DETAILS AND CONCEPT

Product of the company as is defined in company’s introductory


chapter is an sanitaryware product having mainly extraordinary
features like twin flush water saving product, soft close seat cover,
shower temple product. This product talk about giving an spa foot

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massage and inbuilt Jacuzzi unit which give experience artificial
water waves and facility like radio and telecalling with six body jet
spray.

• Wider product range:

Capitalizing on a strong brand image and an evolving market for


Sanitaryware products likes orissa Pan, EWC (European Water
Close), Wash Basin Apart from this CSL has expanded its product
range to other related Bathroom products like shower panels,
shower cubicles, shower temples, bath tubes, whirlpools, bath
fittings, glass bowls, sensor for Tap and Urinal, glass basin,
PVC seat covers and PVC cisterns, which makes it a total
bathroom solutions provider.

SECTION C

MANUFACTURING PROCESS DEPARTMENT

Manufacturing Process Layout

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Raw Material

Slip House Mill House


(Slip) (Glaze)

Casting

Green House

Kerosine

Inspection

Glaze

Placing

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Kiln

Sorting

Ware House

Dispatched

Raw Material which is use in this ceramic product is basically


Clay: Ivory color which has good strength and excellent drying
capacity other than this Than Clay, Bikaner clay, Felspar,
Quartz which is approved after R & D Testing then shifts for next
process.

In slip Plastic Clay constitute 52%, silica 12 to 14 % and feldspar


30 to 40 % while for glaze it is mixture of feldspar, Quartz, calcite,

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china clay, Tulk, Zinc oxide, Barium Carbonate , Zirconium
Silicate which is imported from African country

Then in casting Department slip is poured in mould of required


design. Here mainly three types of casting carried out: Beam
Casting is semi manual casting, Bench casting manual casting,
Battery casting is automatic casting. Depend up on production
requirement they use this casting alternatively

After casting piece is go to green house department where if any


crack it will be automatically filled up. Pin hall plaster through
water base Glaze. Then it is process through kerosene dept. where
unforeseen crack is repaired. Then piece go to the inspection
department which fully inspect the piece thoroughly. After Glaze
dept. do the Glaze of piece. Then it is moved towards placing dept
and then Kiln dept. is heating the piece up to 1200 c by automatic
Kiln. Then piece are sorted and if crack is seen then it is piture and
if small crack is there then it is Re-Kiln by repairing crack.
When piece get ready it store in to the Warehouse by Gasket
Packing. And as per order of Marketing Department it gets
dispatch to Client Premises.

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Thus production process carried out from raw Material to Finished
Product. Stringent Quality control followed by CERA. It is first
one to use Natural Gas in Its Production Process.

HR PRACTICES

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Here we have included some of the HR practices followed by cera
sanitaryware. Purpose is to study what kind of HR Procedures
being followed and what are the details of the same etc.

Recruitment:
The recruitment is done mostly through advertisement in
newspaper, internet portals or campus recruitment. This
recruitment is done on the basis of manpower requirement from
various department of the company. If the candidate has qualified
for the next round, then higher authority takes an interview of the
concerned department in which position has been vacant and then
if is being selected, then they get the offer from the company side
and the candidate has to reply within 2 days.

Selection:
Selections of the candidates are based on the interview
performance of the candidate and his/her educational qualification,
additional qualification, speaking & Convincing ability of the
candidate (for Sales Personnel) and relevant experience. While
comparing with the recruitment at higher post, they are selected on
the basis of interview performance and on the basis of their ability
to handle people and handle tricky situations and ability to lead
people are also analyzed.

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Letter of intent is given to the selected candidate an official
offering and then offer letter will be given after approval of joint
director.

Training and Development:


Training to the selected personnel in the sales is given one week
training programme at manufacturing plant based at KADI and for
the development of the candidate additional training will be
provided.

Compensation:

Salary:
Compensation type in cera sanitaryware is the salary. It gives
compensation to their employees on fixed salary basis. The sales
Personnel are been provide a salary slip and their salary is been
credited to their salary accounts with HDFC Bank. Higher
authorities are also been compensated with salary.

Allowances:

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The company is providing allowances to the employees like
conveyance allowance, traveling allowance, mobile allowance, etc.
For instance, the sales personnel get their petrol allowance on
producing the voucher of the amount expensed by them. Also the
higher-level people also get the allowances by the way of
preparing the voucher.

Incentives:
Incentives are also provided to the sales personnel as well as Team
Leaders and Branch Heads. Sales Personnel get the incentive on
achievement of the target given to them. The company pays
overtime incentives to their employees.

Promotions:
Promotions are based on the performance only and on the basis of
appraisal feedback. If any higher position is being vacant then
suitable candidate from the company is considered first. By this
he/she gets promoted.
Thus, Performance is the only criteria for the employees to be
promoted.

Separations:

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Separations of the employee are also based on the performance. If
suppose a sales person has been a non-performer for some months,
then is being separated from the cera sanitaryware. Same applies to
higher authorities also. This can be done by employer with the
prior notice of 15 days to the employee. On the other hand, if
employee wants to be separated form the organization, he/she
should give 15 days prior notice to the employer.

Most probable reasons of the employer to separate the employees


form the organization includes following:

• Any act of dishonesty done by employee.


• Disobedience of any orders given by higher authorities.
• Diluting brand image of the company.
• Irregularity in Attendance by the employee.
• Misconduct or neglect of duty in any cases.
• Incompetence in the discharge of duty on employees’ part.
• Being held guilty by a competent court of any offence
involving moral turpitude.

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MARKETING ASPECTS

Here we have analyzed various marketing aspects of cera


sanitaryware undertaken for the marketing mix of the company.
Various marketing mix of cera sanitaryware are as follows:

Product:
Product of the company as is defined in company’s introductory
chapter is an sanitaryware product having mainly extraordinary
features like twin flush water saving product, soft close seat cover,
shower temple product. This product talk about giving an spa foot
massage and inbuilt Jacuzzi unit which give experience artificial
water waves and facility like radio and telecalling with six body jet
spray.

Price:
Prices of the product and services offered are competitive
compared to our competitors products and also provide value for
money to the customers. Because as we talked in the earlier
paragraph that features provided in the products are very unique
and are having low cost so finally company becomes best cost
provider in the market.

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Place:
As cera sanitaryware is having excellent distribution channel
empowered by 500 dealer’s network and 5000 retailers all across
India. To supplement the distribution network, it has 10 major
depots across India. It has 7 zonal sales & service offices,
supported by another 28 sales offices, 7 bath studios strategically
located in major cities across India. To capitalize on the growth
market for premium products, Cera has entered into an exclusive
marketing agreement with Italy's luxury brand Pozzi-Ginori to
market its designer sanitaryware in India.

Promotion:
Cera sanitaryware ltd has always been proactive in promotional
activities for increasing the brand awareness among the consumer
so the company has promotional scheme directed towards
consumer as well as its partner (dealer).

• Consumer oriented: few months ago, the company had


launch (special offer) the promotional scheme applicable
only in Delhi, Clair set in Rs. 3999/- for only one month.
• Partner oriented: gold scheme, silver scheme and foreign
travel scheme.

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People:
As company is in service industry it needs to have strong
additional 3 Ps of the marketing mix starting from people. In
ceramic industry as goods are produced and prompt service is
given to the people i.e. employees need to be highly trained and
qualified. So requires good qualified and expertise employees to
this competitive industry.

Cera sanitaryware has achieved a good sense of the same by


employing highly qualified employees like M.B.A. and other
Marketing specialized.

Physical Evidence:
Cera sanitaryware is providing catalogs to their customers as a
physical evidence of purchasing the product. If customer wants to
see the physical product then company has its own display center
“cera bath studio” in metro cities of India.

Process:
This last step of marketing mix of cera sanitaryware includes
following points to be done for making the product available to the
customers:

35
• Data regarding details of prospect customers are first being
collected by sales personnel.
• These personnel then make calling and getting appointments
from prospects to explain product and services.
• Next step includes meeting and explaining product and
services.
• Then all the documents required for dispatching the product
to client premises are collected by the sales personnel.
• These all documents are then submitted to Head Office at
Ahmedabad.
• Then order is processed and cheque is collected and thus
order of the goods gets dispatched.

36
FINANCIAL ANALYSIS

Profit and loss account


Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03
Income :
Operating Income 106.51 80.03 60.94 50.62 41.50

Expenses
Material Consumed 45.69 33.05 25.63 20.11 16.31
Manufacturing 5.04 4.46 4.91 4.22 4.24
Expenses
Personnel Expenses 15.16 11.82 10.08 9.07 8.23
Selling Expenses 12.63 10.21 7.63 7.07 3.99
Administrative 9.04 8.04 5.99 4.42 4.08
Expenses
Expenses Capitalized 0.00 0.00 0.00 0.00 0.00

Cost Of Sales 87.55 67.57 54.24 44.89 36.85

Operating Profit 18.95 12.46 6.70 5.72 4.65

Other Recurring 0.26 0.42 0.37 0.36 0.20


Income

Adjusted PBDIT 19.21 12.88 7.07 6.09 4.85

Financial Expenses 2.28 1.39 1.04 1.22 1.52


Depreciation 3.54 2.68 2.11 2.06 1.89
Other Write offs 0.00 0.00 0.00 0.00 0.00

Adjusted PBT 13.40 8.81 3.92 2.81 1.43

Tax Charges 4.92 3.07 1.59 1.02 0.09

Adjusted PAT 8.48 5.74 2.33 1.79 1.34


Non Recurring Items 0.29 -0.02 0.00 -0.20 -0.02
Other Non Cash 0.30 0.18 0.06 0.02 0.10
adjustments

Reported Net Profit 9.07 5.90 2.39 1.61 1.42

Earnings Before 13.07 7.40 3.39 2.11 1.52


Appropriation

37
Equity Dividend 0.67 0.48 0.43 0.40 0.32
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Dividend Tax 0.11 0.07 0.06 0.05 0.04
Retained Earnings 12.28 6.85 2.90 1.66 1.16

38
Balance sheet
Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03
SOURCES OF FUNDS
Owner's Fund
Equity Share Capital 3.04 2.69 2.69 2.69 2.69
Share Application 0.55 0.00 0.00 0.00 0.00
Money
Preference Share 0.00 0.00 0.00 0.00 0.00
Capital
Reserves & Surplus 44.12 25.58 20.23 18.63 17.47
Loan Funds
Secured Loans 24.42 16.70 8.36 6.90 7.87
Unsecured Loans 5.12 3.38 5.10 6.69 6.70

Total 77.25 48.35 36.38 34.91 34.73

USES OF FUNDS
Fixed Assets
Gross Block 63.33 51.03 37.49 35.78 32.72
Less : Revaluation 0.00 0.00 0.00 0.00 0.00
Reserve
Less : Accumulated 13.89 10.44 7.80 5.84 3.87
Depreciation
Net Block 49.45 40.59 29.69 29.94 28.85
Capital Work-in- 10.01 0.31 0.89 0.18 0.00
progress

Investments 0.00 0.00 0.01 0.00 0.00

Net Current Assets


Current Assets, Loans 62.84 40.17 34.10 29.32 24.20
& Advances
Less : Current 45.18 32.79 28.44 24.70 18.54
Liabilities & Provisions
Total Net Current 17.66 7.38 5.66 4.61 5.66
Assets
Miscellaneous 0.13 0.07 0.12 0.17 0.22
expenses not written

Total 77.25 48.35 36.37 34.90 34.73

Note :
Book Value of 0.00 0.00 0.01 0.00 0.00
Unquoted Investments
Market Value of 0.00 0.00 0.00 0.00 0.00

39
Quoted Investments
Contingent liabilities 3.32 2.16 6.51 3.90 35.01
Number of Equity 60.75 53.75 53.75 53.75 53.75
shares outstanding (in
Lacs)

40
Ratios
RATIOS Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03
PER SHARE RATIOS:
Adjusted E P S (Rs.) 13.96 10.68 4.33 3.33 2.49
Adjusted Cash EPS (Rs.) 19.79 15.67 8.25 7.16 6.02
Reported EPS (Rs.) 14.92 10.98 4.45 3.00 2.64
Reported Cash EPS (Rs.) 20.75 15.97 8.37 6.82 6.16
Dividend Per Share 1.10 0.90 0.80 0.75 0.60
Operating Profit Per Share 31.19 23.18 12.46 10.65 8.65
(Rs.)
Book Value (Excl Rev Res) 77.42 52.45 42.40 39.34 37.09
Per Share (Rs.)
Book Value (Incl Rev Res) 77.42 52.45 42.40 39.34 37.09
Per Share (Rs.)
Net Operating Income Per 175.32 148.90 113.37 94.17 77.21
Share (Rs.)
Free Reserves Per Share 72.02 47.45 37.40 34.34 32.09
(Rs.)

PROFITABILITY RATIOS
Operating Margin (%) 17.79 15.56 10.98 11.31 11.20
Gross Profit Margin (%) 14.46 12.21 7.53 7.24 6.64
Net Profit Margin (%) 8.49 7.33 3.90 3.16 3.40
Adjusted Cash Margin (%) 11.25 10.47 7.23 7.54 7.75
Adjusted Return On Net 18.02 20.37 10.20 8.46 6.71
Worth (%)
Reported Return On Net 19.27 20.92 10.49 7.61 7.11
Worth (%)
Return On long Term Funds 23.49 25.63 17.02 13.83 10.01
(%)

LEVERAGE RATIOS
Long Term Debt / Equity 0.41 0.40 0.27 0.36 0.46
Total Debt/Equity 0.62 0.71 0.58 0.63 0.72
Owners fund as % of total 61.48 58.45 62.99 61.06 58.04
Source
Fixed Assets Turnover Ratio 1.68 1.57 1.63 1.41 1.27

LIQUIDITY RATIOS
Current Ratio 1.39 1.23 1.20 1.19 1.31

41
Current Ratio (Inc. ST 0.99 0.80 0.79 0.80 0.83
Loans)
Quick Ratio 0.93 0.69 0.72 0.69 0.66
Inventory Turnover Ratio 6.73 6.13 6.12 5.85 4.78

PAYOUT RATIOS
Dividend payout Ratio (Net 8.62 9.35 20.50 28.22 25.63
Profit)
Dividend payout Ratio (Cash 6.20 6.42 10.90 12.39 10.97
Profit)
Earning Retention Ratio 90.78 90.40 78.93 74.60 72.83
Cash Earnings Retention 93.50 93.46 88.94 88.18 88.75
Ratio

COVERAGE RATIOS
Adjusted Cash Flow Time 2.46 2.38 3.04 3.53 4.51
Total Debt
Financial Charges Coverage 8.44 9.30 6.79 4.99 3.18
Ratio
Fin. Charges Cov.Ratio (Post 6.54 7.20 5.32 4.00 3.18
Tax)

COMPONENT RATIOS
Material Cost Component(% 45.68 45.65 44.07 39.55 34.75
earnings)
Selling Cost Component 11.86 12.75 12.52 13.95 9.60
Exports as percent of Total 2.40 3.03 4.08 5.59 6.58
Sales
Import Comp. in Raw Mat. 12.31 11.29 10.33 10.59 12.82
Consumed
Long term assets / Total 0.48 0.50 0.47 0.50 0.54
Assets
Bonus Component In Equity 0.00 0.00 0.00 0.00 0.00
Capital (%)

42
Explanation-

Earnings per share:


Earnings per share are generally considered to be the single most
important variable in determining a share's price. The company’s
EPS shows increasing trend. But the % of increase in EPS is less
in the year 2007 compared to the year 2006, the reason being the
increase in the number of shares issued by the company.

Dividend per share:


This ratio indicates dividend declared per share to its market price
per share. The company’s dividend per share shows continuously
increasing trend year on year. This indicates how profitable the
investment is due to higher yield ratio.

Free reserves per share:


The company’s free reserves per share have shown tremendous
increase on year on year basis. This shows that the company
believes in growth by ploughing back of its profit which can be
compared with rise of its free reserves year on year basis from its
balance sheet.

43
Dividend payout ratio:
The ratio indicates the relationship between dividends distributed
and net earnings of the firm. This ratio shows the fact that
company is paying low dividend compared to the previous years.
This indicates that it is retaining its profit to take care of the
growth factor. The less the dividend payouts, the more is the
company retaining its profits which can be seen from the balance
sheet.

Current ratio:
This ratio is commonly used to measure the short term solvency of
the firm. Here, every current liability of Re 1 is backed by the
current assets of Re.1.39. This indicates the ability of the company
to meet its obligations. It shows the working capital position is
sound.

Quick ratio:
The main difference between the current ratio and quick ratio is of
the inventory, the comparison of two ratios leads to the important
conclusions relating to the inventory hold-ups. Here the company’s
quick ratio is not in a desirable position as it should be in ratio of
1:1 as per the convention. The reason is because of the huge
inventory piling up in the working capital, though the current ratio
is showing improving signs.

Fixed assets turnover ratio:


The ratio indicates whether the capitalization is proper. The
company’s ratio is constantly shows improving signs. This
indicates that there has been efficient utilization of the fixed assets,
thus fully contributing to the sales of the company.

44
Financial charges coverage ratio:
The ratio indicates the extent to which earnings can decline
without resultant financial hardships to the company because of its
inability to meet annual interest cost. Here, the company’s ratio has
shown tremendous improvement in the year 2006 and 2007
compared to previous years. This shows the company’s ability to
suck the fixed financial charge liabilities through its profits.

Conclusion-
• CSL's revenues are expected to increase at 67.77% CAGR
over FY06-09.
• OPMs of the company are expected to increase from 15.45%
in FY06 to 16.13% in by FY09 due to increasing revenues
from the trading activities where the margins are high.
• CSL is expected to have a healthy interest coverage ratio due
to higher EBIDTA margins.
• The company is expected to maintain a low debt-equity ratio
due to its ability to generate high cash earnings.
• Return on Networth is expected to increase from 23.06% in
FY06 to 29.07% in FY09, whereas the Return on Capital
Employed is expected to increase from 17.19% in FY06 to
20.47% in FY09.

45
• Currently, the stock trades at 6.33 x FY09E earnings and at
4.63 x FY09E EV / EBIDTA. The valuations of the company
look extremely attractive, looking at the growth opportunities
and the companies’ plans towards it.

SECTION D

PEST ANALYSIS

In addition to market forces within the industry, it is critical to


monitor the external forces that may impact the industry on the
ongoing crisis. A manager may have a very good understanding of
what is happening within an industry, and yet be blindsided by
external events that change the nature of competition and revenue
within the industry. A marketing framework commonly used to
examine these forces that impact business decision referred to as
PEST. PEST is acronym for the Political/Legal, Economical,
Social-Cultural & Technological factors that shape the
environmental of an industry or a business.

46
It is useful to consider to what extent environmental influences
have been particularly important in past and the extent to which
there any impact which may make any of these more or less
significant in the features for the organization and its
competencies. In order to answer some of the key question about
forces that work in macro environment, a PEST analysis indicating
the importance of political, economical, social, technological
influences on the organization carried out.

Macro Environment

 Political Factors
 Economical Factors
 Socio-Cultural Factors
 Technological Factors

Political Factors

 The sanitation levels are very low in the country at about


34%. The government has decided to improve this and has
set up the National Urban Renewal Mission with an
estimated outlay of Rs1200bn to be spent over the next five

47
years. This is thus going to create a lot of demand for this
industry in the years to come.

 It is estimated that in India there is a shortage of more than


22.5 mn dwelling units and the government is trying to
reduce this gap. This will thus result in a lot of demand for
the sanitaryware industry going ahead.

 The government has given tax incentives to the housing


sector which has resulted in an increasing off take of loans
for housing. With the tax incentives in place, young
population and rising income levels the housing industry will
2500
continue to see good growth which in turn will help the
building products industry to grow.
2000

 The opening of the construction sector to 100 percent


1500 Foreign Direct Investment (FDI) foreign investment is
expected to result in a boom in this industry. This will thus
US $ m

1000
benefit the sanitaryware industry also.

500
FDI Inflows- Sector -wise

Electrical equipment including software moves to


0
2000-01 2001-02
over all 2nd position
2002-03 2003-04
in Nov2004-05
2006. 2005-06 2006 April Nov

Electrical Equipment (including Software) Telecommunications


Transportation 48 Chemicals (other than Fert.)
Services Sector Fuels (Power & Oil Refinery)
Construction Activities
Services sector shows spurt in growth and the top
sector attracting FDI – moving up from the third
position.

Spurt in FDI in Real Estate causes the construction


sector to the third position in Nov 2006.

Economical Factors

Interest Rate:
As housing sector is the main driving force for the sanitaryware
industry. So the increase or decrease in the home loan rates will
have the direct impact on the sanitaryware industry of India.
Demand for residential properties tends to be highly price-
sensitive. Though the underlying demand for housing is huge,
increasing property prices will result in postponement of
purchasing decisions. The growth in housing demand has been
stymied by high property prices. However, home loan rates, akin to
the general interest rates have been steadily climbing in the past
12-15 months. Increase in loan rates will further dampen the
demand for real estate construction. As the interest rate on home
loan rose from 7% in 2004 to 12% by March 2007, affordability of

49
weaker sector to buy houses has gone down sharply. Because of
the rise in interest rates, the equated monthly installment (EMI) on
a 20-year home loan went up by almost 50%. At the same time, as
the real estate prices also rose sharply during the same period,
houses become almost out of reach for the low-income group
people.

The country could face a shortage of 2.65 crore houses by 2012.


Government has been asking banks to lower lending rates to
encourage spending and prevent growth from slowing down. FM P
Chidambaram had suggested that banks should cut rates on home
loans up to Rs.20 lakhs.
But because of inflationary pressure, RBI continued to follow the
tight monetary policy, keeping the interest rate high. But, this has
affected both home buyers and the developers who facing are now
facing a slowdown in the sector.

Inflation:
The inflation rate has the direct impact on any industry. As the rate
of inflation goes up, it reduces the purchasing power of people.
Also in order to control the inflation the government goes for
tightening monetary policy which leads to increase in the interest
rate. This ultimately affects the sanitaryware industry as the

50
increase in the rate of inflation also leads to the increase in the
housing loan rates. Inflation based on the wholesale price index
(WPI) zoomed to over three-year high of 7.41% for the week
ended March 29, 2008. This does not give the very good news to
the sanitaryware industry.

GDP Growth Rate:


The country's economic growth slowed down to 8.4 per cent for
the quarter ended December 31, 2007 The GDP growth during the
year-ago quarter had stood at 9.1 per cent, while growth during the
full year 2006-07 had touched 9.6 per cent. A downturn in
manufacturing and construction sectors pulled down economic
growth rate in the third quarter of this fiscal to 8.4 per cent from
9.1 per cent a year ago. While the growth rate of the manufacturing
sector came down to 9.3 per cent during October-December 2007
from 11.3 per cent in the corresponding period previous year, the
construction sector growth rate dipped to 8.4 per cent from 10.8
per cent during the same period.

The signs of slowdown were also visible in the construction sector,


which recorded a growth rate of 10 per cent during the nine-month
period, down from 11.9 per cent in the corresponding period in the
previous financial year. The financing, insurance, real estate and
business services segment growth rate during the first three

51
quarters slipped to 11.1 per cent from 14.1 per cent. Trade, hotels,
transport and communication sectors, however, managed to retain
the growth rate at 11.6 per cent during April-December 2007. The
growth rate of this sector was 11.8 per cent in the corresponding
period in the previous fiscal year.

Per capita consumption:


In India per capita consumption of ceramic tiles is as low as 0.09
sq. mt. per annum compared to 5 sq. mt. per annum in Europe.
Most of the existing demand comes from the urban and semi urban
areas. However, the rural demand is also expected to grow in
future because of increasing rural income, increasing
health/hygiene consciousness and the growing tendency of Indian
people to adopt new construction materials in their changing life
style. The tiles today have practically started decorating all the
possible areas like dwelling places, working areas, public places,
schools and hospitals. So, one can expect a major market growth

52
and increase in per capita consumption of ceramic products in the
coming future.

Growth of Construction Sector:


One of the important drivers for growth for the sanitaryware
industry is the growth of construction sector. The construction
sector plays a pivotal role in the economy of a nation. It is an
integral part of and defines a country’s infrastructural and
industrial landscape. It includes hospitals, schools, townships,
offices, houses and other buildings; industrial construction; urban
infrastructure (Including water supply, sewerage, drainage);
highways, roads, ports, railways, airports; power systems;
irrigation and agriculture systems; telecommunications etc.
Covering so wide a spectrum, construction forms a basic input for
socioeconomic development.

Housing
The Indian housing industry is highly fragmented, with the
unorganized sector, comprising small builders and contractors, and
accounting for majority of housing units constructed. The

53
organized sector comprises large builders and government or
government-affiliated entities. The Tenth Five Year Plan envisages
a growth of 381% in the total investment made in the housing
segment. Such growth is envisaged owing to the housing shortage,
currently faced.

Commercial

Office Premises
Another major booster for the growth of real estate is growing
demand for office premises especially by booming IT industry
including BPO sector. It is expected that India would continue to
be one of the preferred destinations for setting up back office
operations. Consequently, the growth in the sector will translate

54
into substantially higher demand for commercial space, adding to
the overall investment in real estate activities.

Shopping Malls
Over the last decade, urbanization has increased. The boom in the
service sector in India in the recent years, has not only pushed up
the disposable income of the urban population, but has also made
them more brands savvy and status conscious. This increase in
disposable income along with more brand awareness results in
increase in sales of branded goods. The increasing income level
and changing life style and consumer approach towards branded
goods is expected to translate into higher demand for shopping
mall space. This will lead to strong growth in mall development
activities. It is further expected that while mall development
activity was initially restricted to a few major cities like Mumbai,
Chennai, Delhi, Noida, Banglore and Gurgaon it will now onwards
extend to other cities like Surat, Jaipur, Vadodara Kolkata, Pune
and Ahmedabad etc. thus causing a boom of real estate activities in
those cities.

55
Multiplexes
Another growth booster for real estate activities is growing
demand for multiplexes. The growth in multiplexes is being driven
by the following factors: Multiplexes typically have 250-400 seats
per screen as against 800-1000 seats in a single screen theatre,
which gives multiplex owners additional flexibility, enabling them
to optimize capacity utilization further, growth of multiplexes is
being driven by favorable government policies. The income tax
benefits have resulted in most major players announcing multiplex
projects in smaller towns. The aforesaid growth of multiplexes is
expected to push the growth of the real estate related activities.

Hotels/Resorts
With the increase of disposable income in the hands of Indian
middle class, the ability of spending a larger portion of their
income on tours and travels is going up. This factor, coupled with
the changing lifestyle of Indian population, has created demand for
quality hotels/resorts across this country. In addition, India is also
emerging as a major destination for global tourism which in turn
pushing up the demand for hotels/resorts across India. This
increasing demand for hotels/resorts across India, is offering
another opportunity for real estate development.

56
Builders
Real estate developers and builders are also changing their
profiles. They have started becoming more organized, with a clear
focus on building superior infrastructure, using the best quality
materials. They are emphasizing on international standards and
consciousness for better quality raw material. Technology has
evolved in the construction business, so using them, as part of the
process has been very vital in these competitive environments. The
banks have also played an important role in the process, by
increasing the availability of funds, which has helped evolve a new
breed of developers, thus providing opportunity for real estate
development.

IT Parks
The development of IT parks has also resulted in demand for
sanitaryware industry. It is estimated that for every 1 lakh square
feet of space occupied by IT-ITES parks there is an immediate
demand created for 7 lakh square feet of residential property thus
providing a market for sanitaryware industry.

57
Socio-Cultural Factors

Household Income:

58
The above chart shows that middle, upper middle & rich
households are going to increase considerably from 2004-05 to
2014-15 which does show very good demand for sanitaryware
industry in the future.

Life Style Pattern


The growing culture of malls in the country is providing a market
for the sanitaryware industry. It is estimated that about 600 malls
are going to come in the country in due course of time which thus
augurs well for the sanitaryware industry.

There is a growing trend of brand consciousness in India at


present. Customers are becoming more and more brands conscious
because of assured quality on the one hand and higher social
prestige associated from the use of branded product on the other.
This trend is expected to continue in future and this would place
the organized sector at an advantageous position over the
unorganized sector. This sector will contribute towards all the
domestic requirements.

59
Population Growth:

60
The above chart suggests that India will overtake China in terms of
population by 2030. This shows that India’s population is rising
very fast. This population will give boost to the housing sector.
And housing is one of the main driving forces to the sanitaryware
items. Thus rising population will also add to the sanitaryware
industry of India.

Technological Factors

The use of German know-how ensured CERA’s technological


superiority over others in uncompromising quality. Established
with an initial capacity of 3,500 MTPA, the plant underwent
several periodical up gradations and modernizations to reach
15,000 MTPA. The plant is under massive expansion and will be
largest single location manufacturer in India as far as sanitaryware
is concerned.

Cera revolutionized the way Indian consumers looked at their


bathrooms by changing the perception towards bathroom. It was
the time, when an average Indian gave last priority to their
bathrooms -- after drawing rooms, bedrooms, kitchens and then
bathrooms in that order. The turning point was CERA’s advertising

61
campaign “Your bathroom is a room too… “Which made the
customers sit up and think on their priorities in furnishing their
home? Cera is also credited with branding of sanitaryware in India.
The continuous advertising from its launch made Cera a brand and
consumers started asking for not just sanitaryware but by brand
name, also an elevation from a mere utility product to a lifestyle
product. also Cera is first to use natural gas for firing Ceramic
product in production .
CERA has now added other bathroom products like Shower
Cubicles, Bath Tubs, Bath Fittings etc., to its range of products,
thus progressing towards its vision to become a complete
bathroom solution provider.

• WORLD TECHNOLOGY USE BY CERA


To keep ahead of competition, Cera has always kept its technology
ahead of rest of the players in India. It took help from ceramic
technology suppliers from several countries in Europe time and
again so that its process and products are of international norms. It
also helped Cera bag large export orders from the US, unmatched
by any other Indian sanitaryware company. Cera could easily make
products conforming to ANSI, apart from European, Australian,
Canadian and Indian norms. CERA has been constantly using

62
internationally renowned consultants in the ceramic field to
upgrade its production processes, yield and finished goods quality.

Product innovation has been CERA’s forte. One after the other,
Cera launched not only new designs, but even new innovations in
India. The first was bath suites—a unique design concept
consisting of WCs, wash basins, bidets and accessories, giving the
bathroom a distinct personality. A series of bath suites—Crowne,
Concard, Capri, Cornet, Comet, Clair, Cognac, Celebrity, Celeste,
etc.—were launched in quick succession. Cera is also credited with
launch India’s first monoblock EWC, Cologne and now has an
array of one piece EWC & wash basins to its kitty.

• TWIN-FLUSH TECHNOLOGY
Water scarcity has always been a concern in most parts of India.
When there is shortage of water, can we not think of conserving it,
by sending less water per flush down the drain? This concern was
brainstormed by our technical and research personnel, designers
and quality assurance and marketing personnel and thus the
concept of twin action flushing was born. We found that in most
households, a WC is used more as a urinal and still it was using 8
to 12 liters of water for each flush. Our team then came up with the
idea of half flush along with full flush. A household can save

63
substantial quantity of water by installing twin flush. Even where
water is available in abundance, we advise twin flush because the
cost of electricity for pumping extra water to overhead tank can be
saved. In India, ever since we pioneered the twin action coupled
closets two years back; it has caught the fancy of all architects,
plumbing consultants, trade, customers and even competitors. One
after the other, all manufacturers commenced twin action.

Technology which is used by CERA in production of the ceramic


products is as follows:

Bench casting: in bench casting moulding and casting process


done manually by skilled worker. so production capacity is Lower
due to manual production.

Beam casting: in beam casting iron beams are used for proper
casting in which less manpower is required in a way it is semi auto
technology.

Battery casting: in Battery casting iron beams are used for proper
casting in required in a way as it is automatic technology. This
casting doesn’t required manpower. So production capacity is
higher due to this technology.

64
COMPETITIVE FIVE FORCE MODEL

Every business unit should develop a competitive advantage in


order to accomplish its mission. Three interrelated questions have
to be considered in developing the business unit’s competitive
advantage.

• First, what is the structure of industry in which the business


unit operates?
• Second, how should the business unit exploit the industry’s
structure?
• Third, what will be the basis of the business unit’s
competitive advantage?

65
Five interactive competitive forces collectively determine an
industry’s long term attractiveness: present competitors, potential
competitors, the bargaining power of suppliers, the bargaining
power of buyers and the threat of substitute products. This mix of
forces explain why some industries are consistently more
profitable than others and provides further insights into which
resources are required and which strategy should be adopted to be
successful. The strength of individual forces varies from industry
to industry and, overtime, within the same industry.

66
67
 Rivalry among existing players
Variable Degree of Rivalry
Low Moderate High
No. of Players 
Growth of Industry 
Degree of

differentiation
Price competition 

[Table: Rivalry among Existing Players]

• Number of players: There are approximately 20 to 25 organized


players in the ceramic industry particularly in sanitaryware
segment and lots of unorganized players whose market share in
the industry is relatively high. So, the rivalry among the big
players is very much high.

• Growth of Industry: In order to accelerate the growth, the


companies are increasing their range of products. Major growth
drivers for the industry are:

 Healthy growth in housing sector due to rising income and


aspiration levels and attractive mortgage rates.

68
 Growth of Retail & Entertainment sector through the
development of new shopping malls multiplexes etc.
 Increasing demand from the IT & ITeS SEZ and growing
Corporate Township Project.

 Total demand from replacement market is around 10% in


India compared to 80% in the developed countries. Growth
from this market is likely to accelerate rapidly due to
continuous up gradation of trend, availability of new and
better designs, easy availability of finance and higher
disposable income.

So the growth in the industry is relatively high.

• Degree of Differentiation: The products or services are


moderately differentiated as products provided are identical. It
is obvious that rivalry was moved to very unfortunate price
competition.

• Fierce Price Competition: the companies in this industry try to


provide huge amount of discounts to their customers to stand in
this fierce competition with the unorganized players having a
huge share in the market. This is because the customers are not

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aware of the branded products in this market and prefer to have
products of unorganized players which are very cheap in terms
of quality and price.
Thus the price competition is huge factor and very high.
The sanitaryware manufacturers in the unorganized sector
continue to enjoy duty exemptions, which is not conducive for
healthy competition. CSL faces a lot of competition from the
unorganized sector in Gujarat which is a cause for concern to
the company.

 Bargaining power of Buyers:

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Variable Degree of Bargaining
Low Moderate High
Access to information 
Switching Cost 
Awareness 
No. of sellers 

[Table: Bargaining Power of Buyers]

• Access to Information: The first and foremost thing that and


consumer looks for the information that is available with the
dealer and that can be widely accessible by the consumer. The
dealer needs to provide all the information whenever asked by
the consumer. The dealer should help the customers for making
the purchase decisions for sanitaryware products. The company
has also its own display center which gives all information to
consumer apart from dealer.
From this point of view the bargaining power of the customer is
very much high.

• Switching Cost: There are many players in this industry. So, the
buyer has the wider choice of selecting his Brand which can

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best fit to his/her expectations and Budget with good Quality
product. Here the switching cost is low for the Consumer. So,
we have concluded that the bargaining power of the buyer in
this case is higher.

• Awareness: Looking at the current market trends, the


Awareness for the CERA is increasing at moderate level but
now company has initiated the Branding exercise to increase the
awareness level among the consumer. However, the proportion
of these consumer is very much moderate, so the bargaining
power of the investors is moderate in terms of Awareness.

 Bargaining power of suppliers (Service Providers):

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In manufacturing industry it is very difficult to clearly define the
key supplier. So, we have considered below Raw material
providers as the suppliers for the Manufacturing firm. They are
providers of the Raw materials which is use in this ceramic
product is basically Clay: Ivory color ,Than Clay, Bikaner clay,
Felspar, Quartz, , calcite, china clay, Tulk, Zinc oxide, Barium
Carbonate , Zirconium Silicate which is approved after R & D
Testing .

Variable Degree of Bargaining


Low Moderate High
Dependency 
No. of suppliers 

[Table 7.3: Bargaining Power of Suppliers]

• Dependency: The CERA Company is moderately dependent on


their Raw material providers as we mentioned earlier. They
need to meet every requirements prescribed by the Company’s
Quality control Department and company held minimum 3-4
Raw material provider for its Product requirement

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• No. of Suppliers: There is very limited no. of suppliers. To get a
platform for the business they have a very Moderate choice.
Company’s is having minimum 3-4 Raw material provider for
its Product requirement and some imported product are
imported from china.

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 Threat of substitute products and services:

No. of Substitutes: there are no such substitutes for these


products as such it is necessary requirement of human being.

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 Threats of New entrants:
The increasing imports of sanitaryware and the likely
commencement of new sanitaryware plants in the country by the
multinationals can cause a threat to the growth of the Company.
Few companies like ROCA, KOHLER, RAK, TOTO, and
AMERICAN STANDARD have already taken steps to enter the
market.

Variable Degree of Threat


Low Moderate High
Entry Barriers 
Degree of Demand 
Growth Potential 

[Table: Threats of New Entrants]

Entry Barriers: In this industry the entry is costlier to start the


business at the entry level. The existing players are facing a high
threat from the unorganized players in the market. These big
players can bear a high amount of investment at the initial stage
itself and can expand themselves to a wide area in a very short
span of time. The entry barriers for organized sector are-huge
manpower requirements, since sanitaryware manufacturing is

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highly labour intensive, non-availability of standardized raw-
materials (every manufacturer has to source raw materials from
mines and have its own quality assurance systems), low market
size (the market currently is estimated to be just around Rs7bn)
and innumerable number of unorganized sector players who thrive
partly on government policy of levy-exemption and partly on
evasion of taxes.

• Degree of Demand: The demand for the sanitaryware product is


to remain high due to healthy growth in housing sector as well
as the retail sector will boost the demand for sanitaryware
products. The growth in the. This will be supported by rising
income levels and increasing awareness about sanitation and
hygiene and aspiration levels and attractive mortgage rates.

Total demand from replacement market is around 10% in India


compared to 80% in the developed countries. Growth from this
market is likely to accelerate rapidly due to continuous up
gradation of trend, availability of new and better designs, easy
availability of finance and higher disposable income.

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• Growth Potential: It is likely to see the high growth potential in
the industry as the Housing sector is booming and the more and
more people come to invest in the Realty sector .This shows the
high amount of Growth opportunity for the existing players.

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CONCLUSION OF PORTER:
By studying the above model, we drawn the following
conclusion:

The sanitaryware manufacturers in the unorganized sector


continue to enjoy duty exemptions, which is not conducive for
healthy competition. CSL faces a lot of competition from the
unorganized sector in Gujarat which is a cause for concern to
the company.

After studying the Model, we can conclude that Sanitaryware


business completely depends on the development and booming
of the Housing and Retail Sector. Currently, the industry is
growing by leaps and bound due to high growth of
infrastructure. In near future, the great phase of consolidation
will start. Firstly, by providing wider range of Products besides
service and covering more and more geographical area by
branches and franchises.

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SWOT ANALYSIS

STRENGTHS:
• India’s first to use natural gas firing.
Direct connection of natural gas from GAIL has certainly
helped CERA in better margins. However, this is only one of the
several advantages. CERA has captive power plant using natural
gas. CERA also has wind turbines. Thus CERA is not dependent
on government electricity board for its power requirements.
Others will take a long time to catch up.

Further, CERA is getting natural gas on very cheap rate directly


from the ONGC oil fields, which will continue to be cheap,
wherein others are getting imported LNG which is three times
costlier than what cera is getting.

• India’s first to launch twin flush technology & 4 liters flush


WC.

We have twin flush models that on an average consume only 4


liters of water, against the others which can use up to 6 liters
every flush. That quantifies to 50% of water saving. With water
scarcity in urban areas, there are a lot of initiatives that have
already been taken by Metros like Mumbai. Others will have to
soon follow in order to save water.

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• Wide product range.
Capitalizing on a strong brand image and an evolving market for
bathroom products, CSL expanded its product range to other
related products like shower panels, shower cubicles, shower
temples, bath tubes, whirlpools, bath fittings etc., which makes it a
total bathroom solutions provider.

• Huge distribution network.


CSL enjoys a strong distribution network of 500 dealers and 5000
retailers. To supplement the distribution network, the company has
several depots and zonal offices across India. This will help the
company in increasing its market share.

WEAKNESSES.

• The company has only one manufacturing plant at kadi, Gujarat.


While its nearest competitors HSIL and parry ware has more
than one manufacturing plant strategically located across
different parts of India to bridge the gap between demand and
supply.
• Large unorganized existence
• Low R&D for product innovation

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OPPORTUNITIES
• Rising domestic demand for tile, sanitaryware and table
ware
• Large export potential in sanitaryware in Middle East, Africa
and Central Asia.
• Exploit local expertise in related sectors, clusters
technologies.
• Facilitate supply chain collaboration.

THREATS
• Low priced import from china
• Changing consumer preferences
• Large surplus capacities in the international market.
• Increasing regulatory pressures.

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ANALYSIS OF BCG MATRIX

Parryware Other
Hindusta
n

Cera

MARKET SHARE

Parry ware-35%
Hindustan- 32%
Cera- 20%
Others- 13%
Others include -AMERICAN STD, KOHLER, ROKA, RAK

SALES DATA OF THE CURRENT YEAR 2007-08

PARRY WARE – Rs. 500 CRORES


HIND – Rs. 407 CRORES
CERA- Rs.110 CRORES

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PRODUCT LIFE CYCLE

Industry Position

For the last 6-7 years, the sanitaryware industry in India has shown
dramatic growth with major players doubling their production
capacity. The demand for high value sanitaryware in India is
growing very fast. Indian Sanitaryware industry is witnessing a
boom growing at a 12-15% growth for the last couple of years.
There are generally mixed forecasts regarding the potential for the
housing market, an essential driver of replacement and new

84
bathrooms. The baths and Sanitaryware market will continue to
grow over the period 2006 to 2010. The new trend is that
consumer’s tend to associate themselves with quality and well
designed products. This has also increased the demand in the
organized sanitaryware products.

The essential driver is the housing market. In the next decade,


India is expected to be one of the world's fastest growing countries
for Sanitaryware consumption. The Government’s impetus to
improve hygiene and sanitation is likely to increase the demand-
supply gap.

The total demand for sanitaryware in India for the organized


manufacturers is at present approximately 80,000 M.T. per annum.
The region wise demand pattern can be estimated as follows:

NORTH SOUTH EAST WEST TOTAL


18,000 32,000 15,000 15,000 80,000
Note: Every year the above demand is expected to grow by 15 to
17%.

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CORPORATE GROWTH STRATEGY

The projected combined future sales and profit of the corporation’s


business unit (CERA) and product-markets fall short of the firm’s
long run growth and profitability objectives. There is a gap
between what the firm expects to become if it is continuous on its
present course and what it would like to become. This not
surprising because some of its high growth markets are likely to
slip into maturity over time and some of its high profit mature
businesses may decline to insignificance as they get older. Thus,
determine where future growth is coming from, management must
decide on a strategy to guide corporate development.

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Current products new products
Market penetration Product development strategies
strategies • Product improvements
(CERA) • Product-line extensions
• Increase market share • New products for same
• Increase product market
usage
• New applications

Market development Diversification strategies


strategies • Vertical integration
• Diversification into related
• Expand markets for business
existing products • Diversification into
• Geographic expansion unrelated business

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Recommended corporate strategy for the CERA:

• Market penetration & Product development Strategies:


Perhaps, the growth strategy with the greatest potential for CERA
is the aggressive penetration in current markets for their existing
products. This may involve the creation of marketing programme
aimed at non user or Brand-switcher segments of existing markets.
Expansion into new Product development to cater varying need of
customer or product line extension in the current markets is also a
primary growth strategy for CERA.

• Diversification into related business

Another Growth strategy would be Diversification strategies


Example like Diversification into related business of Vitrified Tiles
Industry to leverage its Brand image. That will give company
added advantage of “Complete Home solution Provider”. That will
open new Avenue or Frontier for CERA Company.

• Expand markets for existing products


• Diversification strategies
• New Product Development

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SEVEN-S MODEL

The seven S models is the framework for analyzing organization


and their effectiveness. It looks at seven key elements that make
organization successful, or not: strategy, structure, system, style,
skill, shared values.

About 7 S models:
The 7 S models is a tool form managerial analysis and action that
provides a structure with which to consider a company as a whole,
so that organizations problems may be diagnosed and a strategy
may be developed and implemented.

The 7S diagram illustrates the multiplicity interconnectedness of


elements that define an organizations ability to change. This model
helps to change managers thinking about how companies could be
improved. It says that it is not just a matter of devising a new
strategy and following it through. Nor is it matter of setting up a
new systems and letting them generate improvements.

To be effective, organization must have a high degree of fit, or


internal alignment among all the seven Ss. Each S must be
consistent with and reinforce the others. It is impossible to make

89
progress on one without making progress on all. Thus, to improve
your organization, you have to master system thinking and pay
attention to all of the seven elements at the same time. There is no
starting point or implied hierarchy-different factors may drive the
business in any one organization.

With these aspects, we have analyzed all the 7-S for Cera
Sanitaryware Ltd. to know the effectiveness of the company. These
7-S areas follow:

1. Structure:
It is very clear that a well-defined Organizational structure
gives the employee a perfect view of to whom they have to
report and from whom they are going to receive orders. Thus,
a structured organization is very effective. The same with
CERA. They have well defined all the level of the company’s
organizational Structure .Thus making no confusion for any
employee and speed up the working level.

2. Strategy:
Strategy as we all know has a tremendous importance in
success of any organization. This is because strategy of any
company talks about the game plan that they are going to

90
have for the development of the organization and also how to
compete in the market against rivalry. But when we talk
about developing strategy, it is easier task compared to
executing these strategies. This is because when its time to
implement strategy, it need to have a lots of coordination
among all the employees and organizational resources. Thus,
CERA have well defined strategies and are implementing
with very good speed. Also they are focusing on
downloading vision and mission in the mindsets of each and
every employee and they have the products catering to all
segment of its Target Market so that they become clear that
what company wants in the future to aggressively Propel the
Growth and where it want to go, so they can go in the right
direction.

Thus company is using clear cut strategy of increasing their


market share by increasing their sales force and expanding in
to Innovative and different new types of Products.

3. System:
System as a whole should also be analyzed for checking any
organizations effectiveness. Because when we talk about
system, it includes all the functional and procedural aspects

91
of the organization. CERA has fairly implemented
procedures and functions because when we talk about CERA
they have well defined strategy and structure and all Aspect
of Functional Area are being very well executed. So
company is having very well organized system.

4. Style:
Style refers to action taken by top Management to exist in the
market with Charismatic Leadership. Here, CERA’s top
management has done a good job in getting differentiation in
perceiving the CERA Brand which stand for “Value for
money product” among the Consumer and Quality is
synonymous with CERA is all hard effort of the Top
Management Particularly by their Chairman Vikram Somany.
This gives the company a different brand personality in the
mindset of the customer about CERA.

5. Staff:
As CERA is in the manufacturing industry, for its success it
needs to have an excellent power of Human Resources. This
is because in any organization behavior of people, Excellent
service -oriented people, their talking pitch and their ability
to tackling & Problem solving Approach to the customers

92
makes difference in the organization. Thus, CERA has
achieved this by employing a well trained staff.

6. Skills:
When we talk about skills, we talk about those activities,
which organizations apply to be best and for which they
become known for. Here CERA is well known for providing
excellent product features at comparatively affordable prices
so kind of giving value for money to the customers. And for
this effectiveness it needs to have well trained employees.

7. Super ordinate goals:


Super ordinate goals refer to guiding concepts, values and
aspirations that unite an organization in some common
purpose. Here we may also talk about goal congruence. This
refers to an overall organizations movement toward
achieving same goal. CERA has also one goal to achieve that
is being a market leader in its field and to have top of the
mind image in customers’ mindset. So when they talk about
Sanitaryware Product, it comes CERA first in their mind.

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SECTION E

FINDINGS AND SUGGESTIONS

Findings:

In the next decade, India is expected to be one of the world's


fastest growing countries for sanitaryware consumption. The
sanitation penetration has more than trebled from 8% in 1982 to
18% in 1994 and to 29% in 1999.

The comparative penetration levels in neighboring countries are as


follows: Pakistan: 50%, Sri Lanka: 65%, Malaysia: 94% and
Thailand: 96%.

The government impetus to improve hygiene and sanitation is


likely to increase the demand for sanitaryware in India. Moreover
the increasing urbanization of India and the consequent
requirement for residential and commercial buildings will be a
major driver for growth of sanitaryware. Along with this the focus
of the central and state governments to provide housing facilities
to the poor, is also expected to generate demand.

The National Housing Policy formulation that envisages "Housing


for all" by the end of Ninth Plan period is a big step towards this.
Indira Awaas Yojana, Samgra Awaas Yojana are programs for
providing housing to the rural poor is a key step taken by the

94
government in this area. The housing development organizations
like HUDCO, State Housing Development Boards and Rajiv
Gandhi Rural Housing Corporation Ltd. are also playing a large
role in this initiative.

It is estimated that there is currently a demand for 20 million


housing units in India. Further, a significant number of the 115
million housing units across the country will need reconstruction
for improvement. Therefore a replacement market will emerge,
though currently original equipment sanitaryware market accounts
for nearly 90% of the market.

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Suggestions:

 To increase the market share company should spend


moderate amount on advertising through local newspaper
and television all across India.

 Needs to increase the brand image and brand preference


especially in north India where company’s market share is
less compared to other competitors.

 To locate the production plant in other parts of India.

 To provide good after sale service.

 Keep innovating product offerings.

 To identify the market opportunities due to recent boom in


realty sector.

 To launch flank product against the local sanitary product


whose price is very low for giving them tough competition.

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BIBLIOGRAPHY

Books:
1. Crafting and executing strategy. Arther A. Thompson Jr. A.J
Strickland, john E.Gamble. 14th edition
2. Marketing Strategy. Walker, Boyd, Mullins, Larreche .fourth
Edition
3. Marketing Research. David J. Luck, Ronald S. Rubin Seventh
Edition
4. Indian financial system; M Y Khan; 3rd edition; tata mcgraw hill.
5. personnel manangement; ashwathappa; 3rd edition.

Magazine:
1 Faqs for u, issue 2007
2. Business world issue 2007
3 4P’s Business and Marketing issue 2007

News paper:
1 The Economic Times
2 The Business Standard
3 The Financial Express

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Reports:
 Cera annual report for the year 2006-07

Software:
CMIE (Prowess)

Web Site:
 www.indiainfoline.com
 www.cii.com
 www.surfindia.com
 www.cera-india.com

 www.livemint.com

 www.iccta.org

 www.scribd.com

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