SGL Ltd.

has been a manufacturer of Low End Carbon Steel fabricated equipment for
the chemicals processing industry since 1970. The product range includes distillation
towers, chemicals reactors, heat exchangers, Dryers, Filters and other process
equipment made to order for specific customer needs. Over the years the chemical
process equipment market for these Low Technology products has witnessed entry of a
large number of players and is in fact over crowded on the supply side and has been
decelerating on the demand side following liberalization, demand recession and lack of
new projects. The margins have been continually falling and survival of the fittest and
the leanest has never been truer.
GMML Ltd. is also a chemical equipment supplier to the process industry and their major
product line is not only the run of the mill equipment just like SGL Limited but corrosion
resistant glass lined equipment up to 50,000 litre for Agrochemicals, Bulk Drugs,i.e.
Active Pharmaceutical Ingredients, Dyes, speciality chemicals and pesticides
segments of the chemical industry. The maximum capacity offered by competitors is
20,000 litres only. GMML Ltd. were the pioneers in glass lined equipment as imports
substitute way back in 1965 and since 1994 has a joint venture with a leading US based
multinational company, specialising not only in Glass lined equipment but several other
equipment required by the Chemical Process Industry in India and overseas. The
Company enjoyed monopoly for over 20 years and had an Net Profit Before Tax (NPBT)
of over 25% till the mid 1990s.The order book was always overflowing and the equipment
were delivered after a waiting period of almost 8 to 12 months. The interest income from
deposits/advances taken from the market amounted to more than Rs.2.5 Crores per year.
However, since 1996 till date, the Company has been experiencing squeeze on margins
and is affected by the business conditions in the Country and to an extent by competition.
The Cash and reserve position of GMML Limited remains fantastic. The population of
GMML equipment in India exceeds 5000 units where as the others do even have 1500
units in operation. It may be noted that over the years the sizes have been standardised
internationally.
The monopoly syndrome developed during the monopoly days had also made the
personnel arrogant and there were instances of misbehaviour with the customers.
GMML Limited also has the capability to fabricate Stainless steel. Alloy Steel and Exotic
Metals increasingly required by the Pharmaceutical industryTHE SUNRISE INDUSTRY
of INDIA-- A technology not available with the local competition.
The U S based joint venture partners have various technologies available in addition to
the process equipment.
In 1987, a Hyderabad based Company MILE Ltd. entered the glass lined reactor
business in technical collaboration with a Japanese company keeping in view the
increasing demand of Drug Industry in Hyderabad and Vizag. The venturing into glass
lined equipment for them was in fact a forward-integration exercise, as one of the group
companies had equipment fabrication facilities. However, the sales and profitability
situation during the last 7/8 years have not been very flattering and in fact has been
dismal.

The market also has witnessed (FOLLOWING LIBERALISATION) entry of cheaper
Chinese glass lined reactors which are being sold at almost half the price of the
market leader viz. GMML Ltd. The Chinese equipment also are delivered in about 2
months from the date of placement of orders.
Mr. Mehta, the CMD of SGL Ltd. has been wondering what to do next. In 1994, SGL Ltd.
decided to enter the glass lined equipment business with indigenous technology. The
use of technology being no other than a well qualified, experienced but disgruntled
employee of GMML Ltd. Mr. Mehtas SGL is located a few kilometres from the GMML
factory in Gujarat. The inside information on GMML Limited is thus available to SGL
Limited. The strategy is to contact GMML customers and offer very very attractive
pricesAs low as 70 % of GMML prices.
Analyze the above case starting with a SWOT analysis on all the players and answer the
following questions with special reference to buyer behaviour but do not confine
yourselves to the questions alone.
Discuss the customer/buyer behaviour towards SGL Ltd., GMML Ltd., Mile Ltd. and
the Chinese sources.
If Mile employs a pricing policy of undercutting the price by as much as 30% vis--vis
GMML Ltd., how should the GMML respond?
Suggest a market share protection strategy for GMML Ltd. Do Ansoff possibilities
exist for GMML?
What do you think will happen to MILE Ltd. in the tug of war between GMML Ltd. and
SGL LTD.?
Do you think GMML Ltd. will come out unscathed in the war?
SGL is a relatively late entrant in this business. Suggest a Marketing Strategy for
SGL
What are the possible segmentation strategies in B 2 B markets? Is it possible for
these companies to apply these segmentation strategies? Please elaborate.
What are the differentiation strategies possible?
What weakness of GMML can the competitors attack and how?
Are there other avenues of increasing revenues particularly for GMML Limited?
Please explain.