TNPLs PORTERS FIVE FORCE ANALYSIS

Porter's Framework envisages of five fundamental competitive forces The Five forces of Porters
Analysis are,
1. Entry of Competitor

TNPL is seen not only as a paper industry but also as a brand. It has held a very
significant market share for a long time and loyal customers are not very likely to try
a new brand.
In India there are several Paper industries but added advantage against its competitors
is brand name, then cheap product cost as it is produced from sbagasse (sugarcane
waste).

Since the Economy of scale of TNPL is quite large, it is a government owned

company, low unit cost, it is enjoying strong position.

The buyers are strongly depending on TNPLproducts as the product is of good quality.

Capital requirement is very high than expected.

Government policies in the aspect of new entrants is moderate.

Existing player retaliation is low /moderate.

2. Threat to Substitute products

The threat from new entrants is low on account of high capital cost, low return on
investment and scarcity of raw materials for paper making.

Relative quality of substitute is moderate, because TNPL already producing better

product.
Relative price of substitute is high.

3. Bargaining Power of Buyers

Buyers Power in the market can be termed as moderate to high because
TNPL is satisfying its customer with its special quality.
Product differentiation is low but the quality offers by TNPL is undifferentiated.
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4.

Switching cost to use other products is very low because the raw material used in

TNPL have already found a alternative like bagaase.

There is no threat of backward integration,
Importance of TNPL paper product to buyer is moderate.
The buyers are strongly depending on TNPL products as the product is of good quality

with a low price.

Buyers volume of TNPL product is high.

Bargaining power of suppliers

Bargaining power of suppliers of raw materials i.e. wood, straws, bagasse, waste
paper, energy (coal etc.) and modern technology is high which is a deterrent for

growth of the industry

Importance of supplier inputs to the product is high,so the bargaining power of the

seller is high.
Supplier product differentiation is low but the quality they offer is high.So the

bargaining power of seller is moderate based on the vendors.

Buyers threat of backward integration is very low, so the bargaining power in this

aspect is high.
The importance of industry to the seller is high,So bargaining power of sellers also

high.
5. Rivalry among the existing players

Currently, the main competitor is ITC and BILT which also has a wide range of paper
products under its brand with a similar price.
Since all the paper industries company is focusing on globalizing environment it

becomes a competition for TNPL to survive in the market.

Product differentiation that the rivalry produce is low.
Exit barriers for the rivalry is high.
Diversity of competitors is high.
Capacity of rivalry to scale up is comparatively low.

PEST
POLITICAL ENVIRONMENT
GOVERNMENT POLICIES
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The Indian paper industry has been historically divided on a three dimensional matrix
identified by size, grades manufactured and raw material utilized. Generally, tariff rates have
protected smaller units utilizing unconventional raw material. Over the years, the growth of
various segments, investments levels in specific segments, technological changes, industry
fragmentation and intensify of competition have been significantly influenced by the government
tariff policy.
The role of the government is crucial in the Indian paper industry as it plays the role of
regulation, supplier (the wood supplying forests are owned by the government) and buyer
(government is the single largest buyer of paper).
VAT (value added tax): VAT replaces the existing multipoint taxes levied by various states with
effect from April 05. Excise Duty and Import Duty is 6% and 10% respectively during the 20132014.
Service Tax: Being classified as a manufacturing industry, the industry even for Job Work on
conversion basis will not be subjected to Service Tax requirements. The increase of service Tax
from @10% to 12% during 2014.
Pollution Control: Necessary permission under effluent discharge Act is obtained and the
facilities required to maintain the permission are in place
Excise Duty: Excise duty of input materials such as chemicals, etc are now increased from 10%
to 12% during the year 2014.
Customs Duty: With domestic supply of wood and bamboo falling short of meeting the
growing raw material requirement of the paper industry, the Indian Paper Manufacturers
Association (IPMA) has asked the government to allow duty-free import of wood logs, chips and
bamboo. Currently, import of wood logs and chips attract total customs duty of 9.4% and
bamboo attracts a duty of 36.1% .

Domestic newsprint prices were mainly governed by international trends. The import
duty together with surcharge of just 5.5 per cent is well below the WTO bound rate of 25 per
cent. The recovery in domestic prices, commenced in January this year with the international
price for India hardening to $610 a tonne. However, the low import duty resulted in severe
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dumping and the company was urging the Government to impose the WTO bound rate for
newsprint
TNPL, through the Agro Paper Mills Association, would urge the Government to provide
50 per cent exemption from the 16 per cent CENVAT rate for paper made from non-conventional
raw materials. Under the revised excise duty structure announced in the Union Budget, the excise
rate was hiked from 8 per cent to 16 per cent even for paper made from non-conventional raw
materials. Earlier, the beneficial rate had been levied in recognition of the role of units using
nonconventional raw materials in conserving forest wealth.
During the year, 2013-14, the company exported 33461 Mts. Of Printing and Writing
Paper valued at Rs.136.12 crores to Armenia, Bulgaria, Ecuador, Egypt, Iran, Kenya,
Malaysia,Nigeria, Oman, Romania, Sri Lanka, Sudan, Syria, Turkey,UAE. Continuous efforts are
being taken to increase exports by exploring new markets.
ECONOMIC FACTORS
The Indian Paper Industry accounts for about 2.6% of the world's production of paper.
The estimated turnover of the industry is INR 50,000 crores. approximately and its contribution
to the exchequer is around INR 4500 crore. The industry provides employment to more than 0.5
million people directly and 1.5 million people indirectly. Most of the paper mills are in existence
for a long time and hence present technologies fall in a wide spectrum ranging from oldest to the
most modern. The mills use a variety of raw material viz. wood, bamboo, recycled fibre, bagasse,
wheat straw, rice husk, etc.; approximately 31% are based on chemical pulp, 47% on recycled
fibre and 22% on agro-residues. The geographical spread of the industry as well as market is
mainly responsible for regional balance of production and consumption. The operating capacity
of the industry currently stands at 12.75 million tons.
During 2013-14, domestic production is estimated to be 11.38 million tons. As per
industry guesstimates, over all paper consumption has now touched 13.10 million tons and per
capita consumption is pegged at 10 kg. Demand of paper has been hovering around 8% for some
time. So far, the growth in paper industry has mirrored the growth in GDP. India is the fastest
growing market for paper globally and it presents an exciting scenario; paper consumption is
poised for a big leap forward in sync with the economic growth and is estimated to touch 13.95
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million tons by 2015-16. The futuristic view is that growth in paper consumption would be in
multiples of GDP and hence an increase in consumption by one kg per capita would lead to an
increase in demand of 1 million tons. (Source: Indian Paper Manufacturers Association (IPMA)
Market Size
The market size of the paper packaging industry in India has increased from INR million in
FY2009 to INR million in FY2014 at a CAGR of 11.7%. The India paper packaging industry
registered sales revenue of INR million in FY2014, increasing from the previous year at a rate
of 12.2%. The India paper packaging industry, which has been growing at a CAGR of ~ in terms
of revenue over the period FY2009-2014, is expected to perform reasonably well in the coming
years on account of significant rise in the demand for quality paper packaging products and
increase in consumer spending in India.
Indian Paper Industry accounts for about 1.6% of the world's production of paper and paperboard
in the year 2014.The estimated turnover of the industry is Rs 25,000 crore (USD 5.95 billion)
and its contribution to the exchequer is around Rs. 2918 crore.
The demand projection for future paper can be determined with a host of factors like

Level of national income.

Level of industrial production.
Level of literacy and education.
Size of population
Price of paper, and

SOCIAL FACTORS
TNPL amended some strategy in response to changes in the Current business and
economical climate. With the onset of economic reforms, Public sector companies like TNPL
witnessed progressive deregulations and gradual release of controls by governments and many
PSU's in India suddenly finding themselves hopelessly positioned in terms systems, strategy

being pursued or the organization for a long time . PSU's like TNPL at the time of liberalization
and privatization had to respond to different types of challenges and the responses they
initiated in both strategic and organizational areas to neutralize such challenges.
As recession is still now existing and TNPL is not an exception from being affected by it.
Though TNPL is utilizing opportunities as and when it finds. One such example is Chile
earthquake. Chile pulp capacity is over 4 metric tonnes per year. Indian Paper Industry is not
depending on Chile and it supplies about 5,000 tonnes of pulp every month but earthquake offers
some more opportunities for TNPL. TNPL has shown itself as high performing organization even
in the turbulent period and hold superior market position by following some basics,
1. TNPL created total customer responsiveness
2. Pursued rapid innovation.
3. Empowered the people to achieve flexibility
4. Ensured every employees love changes.
5. TNPL started taking steps to lower the cost of production to face the turbulent environment of
recession.
6. Energy conservation practice.
7. Sustainable growth.
8. Mill expansion plan with a capacity of 155000 mts per annum.
9. Cost cutting in on one time and recurring.
The organization has responded well to the changes in its turbulent environment and the
response had been very effective. TNPL followed. Turnaround strategy/ Cutback strategy to
pass through lean trot..Thus recession offers a chance for innovation by the way of attaining
export of 50394 MT in 2009 10' while previous year 34010 MT (2008 09') hence awarded
special export award from CAPEXIL for the 9th year.
TECHNOLOGY
About 2734 acres of technology based plantations have been raised under Captive
Plantation Scheme over a period of five years. This includes 159 acres of land located in the
abutting villages to grow Eucalyptus trees through drip irrigation using treated effluent water.
TNPL's state-of-the-art technology supported by a team of dedicated professionals ensure that
customers always get quality products. Further, 'Online Process Control Systems' in the
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manufacturing processes help measure and control the critical parameters online.
Biotechnology - Tissue Culture
About 2,00,000 Wild sugarcane seedlings were developed by tissue culture technique for
plantation in 50 acres, in order to study the cane yield and plantation management.
1,20,000 nos of Eucalyptus clonal seedlings were also developed using tissue culture technique
for plantation. Every phase of growth is supported by latest technology and installation
of the state-of-the-art machineries. Now the company has planned to add a new Deinking line to
produce deinked pulp through recycling of waste papers. The Company has also planned to
replace three old boilers installed during 1984 with a new single boiler and install a new TG of a
capacity of 40 MW in replacement of two old TGs. The above replacement would make the
Company productive on energy front. Accordingly, in the biotechnology division, screening of
37 improved clones from the Institute of forest genetics and tree breeding were completed as part
of ongoing research to identify suitable eucalyptus clones based on fibre and pulp quality. The
biotech division has developed micro propagation technique for other pulp wood species like
Casuarina and Melia and is currently engaged in identification of suitable genetic materials for
pulp wood breeding work.