Interviewed By: Mr. Sandeep Gautam, Campus Editor – XIM B, The CEO Insights
Sandeep: In such a competitive industry where there are so many established players, how does Essar Steel differentiate itself from its competitors?
Mr. Dilip Oommen:If you make all the products which others make, the chances are that you will have a tough time. The idea is to get into the niche market as much as possible, to make products for which competition is less or will take time for competitors to reach there. It is important to maintain customer delight and always be ahead in the league. One cannot afford to bask in one’s previous glory. One has to continuously improve and maintain the gap between you and your competitors.
For example though there have been problems in US and Europe but still there are some plants in US and Europe doing well because they make premium quality niche products which others don’t make.
Sandeep: Essar Steel is expanding capacity at Hazira to 10 million tonnes a year from the current 4.6 million tonnes. This expansion is expected to increase the market share of Essar. From marketing perspective what will be the strategy to realize this?
Mr. Dilip Oommen:The idea is to make as much value addition as possible, do more of downstream processing and go a step further by providing service centres and hypermarts, have higher market penetration, get closer to customer, geographically extend the reach and give customers an edge by providing material just in time. We have 1.5MT plate mill, 0.6MT pipe mill, 2MT Cold Rolling Mill and three service centers.
As far as advertising and branding is concerned, we are keeping pace with the time. We have recently changed our logo and are investing more in branding.
Sandeep: Considering that Essar meets most of its requirements in-house, expansion of the steel unit at such a large scale will put pressure on other divisions and services used by Essar Steel like Power, Energy, Shipping & Logistics and other backward integrated units like Pelletization and beneficiation plant. How are the supporting departments of Essar Steel planned to gear up for sustaining this expansion?
Mr. Dilip Oommen:For sustaining such an expansion we have to plan for the entire supply chain and enhance it to cater to the 10MT plant. We are already working on backward integration, enhancing our pelletization capability and looking to have our own mines. We also intend to set up integrated steel plant. One area of focus for us is the raw material securitization. While I say this we realize that one cannot control the market to the extent one would wish to. However one can always try to reduce the cost of production. For this we are working on ways and means of being in the lowest segment of low cost producers and are trying to insulate ourselves from what is happening around us.
Sandeep: Being a traditional enterprise, how has Essar Steel embraced Information Technology in its day to day operations?
Mr. Dilip Oommen:Last year Essar received manufacturing excellence award by Microsoft for IT enablement. We have tried to enable ourselves from the IT perspective as much as possible. We believe it helps us to focus on our bottom line, it improves our efficiency and quality.
Sandeep: There are plans of expanding the global presence of Steel Hypermarts, the steel retail chain of Essar. With the global downturn looming large, how does this plan fit in Essar’s scheme of things?
Mr. Dilip Oommen:The plan fits even better in this downturn. Even in these bad times, the Steel Hypermarts were doing very well. When customers become more speculative about the market, they tend to buy products in lesser quantities. Even bigger customers started buying from the Steel Hypermarts. With this we also eliminate the middle men and traders, getting one step closer to the customer. Customers can step in and buy on the spot in smaller quantities, it is ideal. A pan India network provides vast market penetration. Customers spread across get an access to our steel with a guaranteed Essar quality.
Sandeep: What kind of challenges steel industry has faced in recent times? How do you see the future of Essar Steel five years down the line?
Mr. Dilip Oommen:With every downturn, Essar has emerged stronger. We believe every downturn must be converted into opportunities. The market shrank abruptly, lot of speculation prevailed in the market. Even then steel Hypermarts were doing well and thus we could stand tall and do better than our competitors.
While we increase our capacity, we would like to focus a lot on customer delight. We have started out customer care centre and customer complaint handling through web thereby automating the entire process. We are trying to reduce time taken to address complaints. We have to focus increasingly on meeting the customer’s needs and also their perceived needs. We would like to go one step ahead, study their requirements and suggest what would suit them better. Our R&D is doing a very good job very soon we shall be reinforcing our R&D.
Sandeep: The recent downturn has caught many companies off guard. Job losses and dissatisfied employees comes as no surprise. However Essar seems to be an exception. Essar has not fired a single employee because of the downturn and has very high employee satisfaction quotient. Please share with us the mantra?
Mr. Dilip Oommen:We look at all the Essar employees as an extended family. If there are some employees not up to the mark, we try and give them an environment to get better. We take care of their intrinsic needs and provide them lot of freedom to operate. We encourage out of the box thinking and leadership skills. We have always been lean on our manning. Though we pay well, we have the lowest manpower cost per tonne in Indian steel industry. Since we are expanding we need more people now for our upcoming projects.
Sandeep: What does it take to be a CEO? Do you think the B-Schools today are on the right path in tapping the creative bent of mind of students? What kind of growth opportunities does Essar provide to MBA graduates?
Mr. Dilip Oommen:A CEO must be a good leader. A good leader is one who can chart the course for the people from known territory to unknown territory. Today there are enough tools available to anticipate what to expect in the unknown territory.
Though planning and strategizing is important, execution is also of utmost importance. Lot of industries fail because of lack of proper execution. The B-Schools must concentrate on this.
We have hired MBA graduates in various fields in large numbers. We need young people to manage our business and emerge as leaders in future. As we expand, there is even bigger need and it provides good scope for MBA graduates to join. One concern is frequent job hopping of MBA graduates. They should stick for some time, recognition and reward shall follow.
Sandeep: Any message for MBA graduates and for The CEO Insights?
Mr. Dilip Oommen: Certainly India is producing good quality MBA graduates who are recognized world over. However job hopping should not be too frequent.
The concept of The CEO Insights is very good. It gives us a good understanding of what students think by the in depth questions you ask and also provides students an insight about what we expect from them.