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Garang Metal Limited: Market Entry into Angola*

CASE STUDY, STRATEGIC MANAGEMENT
ET Cases - GSMC, 10 Pages

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Garang Metal Limited: Market Entry into Angola

 

On September 19th 2013, the ninth annual general meeting of Garang Metals Ltd. (GML) was held at their head office at Rabindra Okakura Bhavan, Salt Lake, Kolkata. Given the firm’s strong market and financial performance during the financial year 2012-2013, the discussion for the planned agenda transpired smoothly. Towards the end of the discussion, N. Agarwal, Chairman & Managing Director (CMD), Garang Group, asked his nephew, Deepesh Agarwal (Deepesh), Director, GML, for his vision for GML for the next ten years. Specifically, N. Agarwal asked Deepesh how he could make GML a strong player in emerging global markets. The question itself was not new, since both of them had been contemplating a move towards globalization during the previous four months. Deepesh replied that he would revert within the next three months. Soon after, he convened a meeting of top executives to discuss potential foreign markets. After a lot of deliberations, China and Africa emerged as the top two contenders for investment. At this stage, Deepesh formed two teams, one to study the Chinese market and the other to study the African market. After a preliminary study, it was found that China had excess steel against domestic demand and given GML’s current cost structure it would be unfavorable for GML to enter the Chinese market. However, the other team which studied Africa came up with the suggestion to enter Angola. Deepesh became really excited regarding market entry into Angola..........

Teaching Note Preview

Garang Metal Limited: Market Entry into Angola

 

Synopsis

Garang Metal Ltd. (GML) is a steel producer and marketer, with the registered office in Kolkata. The company is currently operating from an integrated steel plant in Kutch, Gujarat, India, to manufacture Sponge Iron, M.S. Billets, Rolled products (QST bars) at the captive power plant with an investment of INR220 crore and an installed capacity of 25 MW. The setting up and successful operationalization of the Kutch plant created project management expertise within the firm in addition to its proven steel manufacturing and marketing skills. Hence an expansionist thought process, i.e. both domestic and international, crept into the firm’s senior management.

The liberalization (1991) of industrial policy and other initiatives taken by the Government of India has given a definite impetus for entry, participation and growth of the private sector in the steel industry. Internationally, the formerly war-torn country Angola is in the process of privatizing its steel industry. Currently two of Angola’s biggest steel processors – Fabrica de Tubos de Angola (FATA) and Metalurgica de Angola (Metang) operating at about 50% capacity – are managed by Indufer, a private Angolan firm. Therefore, GML management is in a dilemma whether to set up plants in Angola or not.

Prerequisite Conceptual Understanding

This case requires to be linked to the various frameworks of strategic management like SWOT Analysis, Porter’s Five Forces Model, Porter’s Generic Strategies and some other frameworks of responding to environment uncertainty like Opportunity and Threat Matrices, etc. Methods like Market-Build up Method, Multiple-Factor Index Method, Market Information Systems, Marketing-mix models, etc., can be used to evaluate the options available to the decision maker.

Case Positioning and Setting

The case can be used for different courses in undergraduate and post graduate levels of management education. It can be used for a course in Marketing Management as a new market entry strategy creation case or in a specialized course in International Marketing. It can also be used in the Market Research methodology courses focusing on different demand estimation and forecasting techniques. This teaching note is written to solve the case from a business environment perspective. Hence, it covers important aspects of environmental uncertainty for a manufacturer, demand estimation, forecasting under uncertainty and analysis of a market.

Assignment Questions

I. What are the probable challenges to be faced by GML?
II. How environmental factors (internal and external) affect the business of GML?
III. As GML, how would you tackle these challenges and evaluate different options? Create a market entry strategy for GML.
IV..............

 





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Abstract

Garang Metal Ltd. (GML) is a steel producer (investment INR220 crores) and marketer, incorporated in 2005, with its registered office in Kolkata, India. The firm has grown rapidly in the past few years since its inception primarily due to its competencies including a strong focus on improving its portfolio, pro-active business management, work ethics and optimization of cash management. Currently the firm is looking actively at global markets to sustain its growth and provide adequate returns to the stakeholders. This case study focuses on one of GML’s current dilemmas – whether to expand its global footprint by exporting steel to non-traditional markets (like Angola) which could involve setting up manufacturing operations in the importing geographies in the medium term. The primary learning objective from this case would relate to deciding on first time (for a firm, GML in this case) market entry strategies into global geographies with information constraints, also the use of proxy variables (or surrogates) for forecasting/decision-making using available data in situations wherein adequate data may not be available.



Pedagogical Objectives

  • To identify the different external and internal environmental factors affecting a manufacturer in a new market
  • To learn the methods and frameworks to assess environmental uncertainty, and demand estimation
  • To evaluate alternative forecasting techniques in order to choose the right forecasting technique to develop forecasting models

Case Positioning and Setting
The case study can be taught in undergraduate and post graduate levels of management education for topics such as market scanning, demand estimation, forecasting, and market entry strategies.


* GSMC 2017, IIM Raipur

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