Metal junction case study

7/22/2019 Metal junction case study

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METAL

JUNCTION


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INTRODUCTION It all started with the dream of a person Viresh Oberoi,The MD and CEO of METAL

JUNCTION Before starting this venture he spent his

entire career with TISCO India being the 10th largest producer of

steel in the world adding to the advantage SAIL and TISCO contributing over 60% of

total steel production


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A time during the Dot-Com boom where therewere many domestic and international players atthat time.

A perfect situation showed up when SAIL and

TATA set up internal teams to evaluate How their respective companies could take

advantage of Internet and E-commerce

After months of speculation both the companies,which were located in the same geographical

space decided to fuse ultimately to form METALJUNCTION in 2001, soon to be named as thelargest B2B E-Commerce website platform inthe world.


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The basic functions or the activities that they deal are related

to selling second hand steelWhich they are a big dealers at.

Followed by a systematic procees of Auctioning (Forward

and Reverse) Ultimately they undertake both the functions of E-Sourcing

and E-Selling

To further continue, Metal Junction has included logistic

services, finance services, metal and mineral auctions and e-cash management services in the site.


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Coming to company analysis and their presence

Itbegan operations by Selling to-be-disposedidle assets and secondary steel of its two

promoters.

In 2011, mjunction completed 10 years, with

FY11 revenue of approximately INR 1billion

Earned from online transactions worth INR248.5 billion that were consummated on itselectronic Trading Platforms

A large B2B transaction that exist betweenindustrial manufacturers, partners, andretailers or between companies


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Structure of Indian steelindustry


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I

Reach


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Buyer base


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products


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SERVICES PROVIDED BY THE

COMPANY


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Auction services

Financial services

Rebar sevices


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AUCTION SERVICES

With e-Sales process, steel consumers whether small or large,are assured of the quality delivered to them in the mostsimple, efficient and transparent manner anywhere in thecountry.

Ensure that buyers remain not more than a click away fromfulfilling their steel requirements.

No time wasted in negotiations with company executives

Transparent pricing based on market situation, totally freeof bias

Value added services like inspection and finance Reliable information on availability and quality of material

Logistics and Inspection Service to deliver materialanywhere in India


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E-AUCTION

The process of an auction aims to find a fair price

for the goods by identifying buyers who need

them the most. Such auctions are called forwardauctions, where buyers compete with each other

by placing bids for the goods to be sold.

Metal Junction pioneered the concept of e-Auctions for steel by moving the entire process of

auctions to the Internet.


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Metal Junction users have the independence

of bidding via is desktop online platform or

through our mobile application.

Assistance is provided by tele-executives

during the e-auction if faced by any issues


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Advantages

No time wasted in negotiations with companyexecutives

Transparent pricing based on market situation,totally free of bias

Value added services like inspection and finance

Reliable information on availability and quality ofmaterial

Logistics and Inspection Service to delivermaterial anywhere in India


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Financial sevices

Buyer finance

Collateral Free Finance for

selected bidders

To help raise capital forbidding, metal junction has

forged partnership with

many leading Indian banks.

Channel Finance

An exclusive offer from

metaljunction to the sellers,

in association with leadingforeign and private sector

banks in the country to

enable client organization to

sell to their Distributors

Dealers on cash basis and

eliminate debtors from the

books altogether.


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Buyer Finance: How it works

Customer Provides Expression of Interest withapplication form and documents to metaljunction

Metaljunction will discuss with bank & onceapproved, set up over draft limit.

Customer sends Finance Request for approved lots

Bank processes request & directlymakes RTGSpayment to the plant or issues Pay Order*

Customer Lifts Material and makes payment to bankwithin due time limit**


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Who's eligible for buyer finance

Only for bidders associated with SAIL, Tata Steel (Welspun and JSPLas well for TATA Capital Ltd.) and metaljunction for more than 3years.

Minimum 12 successful bids on metaljunction auction platform

Sales Turnover Rs. 2 crs/Year

Positive PAT for last 3 years Dependency on MJ should be 40 - 50% of the total turnover

No delay in payment to MJ / Tata Steel & SAIL in the preceding 24months.

Name of the buyer/promoters should not appear under the

RBI's/CIBIL Defaulters List.

Channel Finance: Improving process


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Channel Finance: Improving process

efficiency & convenience

Benefits:

As a seller

100% secured payment

100% timely payment Single window in terms of online visibility of

transactions

Increased buying power for your channel

partners 24 x 7 x 365 basis transactions

Without any recourse (financial or otherwise)


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As a distributor/dealer

Competitive cost of fund (better than existingworking capital cost)

No security or collateral attached (Clean credit) Hassle free documentation

Over and above existing credit line

Flexible tenure available (30 to 90 days) forrepayment to banks


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Rebaring services

Estimation & Detailing Delivering a diverse range of reinforcement solutions to the civil,

commercial and residential construction industries, MetalJunction offersclients with several options of services to suit their individual needs onEstimation & Detailing. They communicate with the client to determinethe client's needs for each job.

Benefits Quality estimators & Rebar detailers

Civil Engineers are always there to assist the estimation and detailingteam

Quality draughtsman are there to draw the necessary drawings

Engineers are there to handle the 'Error management' on preliminarydrawings

As a value added service structural design advice can be provided in caseit is needed


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Classifieds


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Industry info and news:


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Besides this they also provides subscription to their on

magazines which contain latest news and trends in industry


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Analysis of Business model


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MetalJunction.comRe-engineering of the buying and selling


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Business model


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Value proposition

Transforming (digitising) the marketplace by increasingconnectivity for participants and reducing reliance on paperdocuments.

1. Better prices (price discovery) (flip side)

2. Better process efficiency3. Time saving

4. simplicity

5. Transparency

6. Value added services like inspection,rebarservices and financing


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Better process efficiency To understand this we need to look at traditional system.

DEMERITS OF TRADITIONAL MARKETING

The catalogue should be changed every time it requires hugeexpenses in marketing and advertisements for the competition ofquality, price and availability.

The market place is limited to a geographical area.

In traditional marketing, there is a need of lot of phone calls, emailsand personnel meetings for the sale of the products.

the transaction cost is very high -Cost of inventory, employee salary,order-processing cost and the administrative cost Traditional

marketing requires a middle man for the transaction. Chance of error.


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Enhanced customer Focus

Reduced Transaction Cost

Integration of Supply Chain

Focus on Core Business

Vital Information available to customers

Reduced Cycle time.


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Inspection & finance services to buyers

Metaljunction offer logistic and inspection service to its buyers. The

buyers can avail this service which is located anywhere in India.delivered to the customers on time at their door steps without anyextra cost.

Reliable information on availability and quality.

Systematic approach and coordination. Pre determined transportation rate.

Shorter lead time.

Finance services

online finance which is available 24X7, 365 days a year. Metaljunctionprovide this service at a competitive interest rates. Thus the publicholidays and the Sundays are no more a constraint for business andcommerce. Metaljunction has a integration with client ERP and thebank server for a smooth transaction.


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Better price? how?

Eliminating intermediaries

Reduced transaction cost


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For sellers

Process efficiency

Revenue enhancement:

Market determined price

Increased profit margin(no middleman) Opportunistic selling

Focused selling- of excess inventory


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Transparency


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Revenue model

1. Transaction Fees. Transaction fees have become a primary revenue stream

Transaction fees are a charge on a percentage of the gross

amount of each buy-sell transaction. Generally range from

0.5% on the transaction to 8% or more on more complex

transactions.

2. Advertising on magazines

3. Classified subscription

4. Alliances with financiers


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Market opportunity


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DiversificationMjunction collabration of:

buyjunction,autojunction,valuejunction,coaljunction,financejunction,mjunctionedge,ejunction

Expanding globally India emerging as BPO HUB

Highly skilled,low cost work force-MJ can offer india basedoffshore eauction service

B2C segment- staightline.com


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Marketing strategy

Viresh oberois key formula for marketing:

Creating / unlocking value is of prime importance and not gettingeye balls.

The deal must get consummated on the electronic platform and not

offline. If value is actually being created, customers will have no problem in paying.

Offering a service for free would not work.

Starting small and ramping up fast is better than launching big

Use lead management. Maximize the value for each lead. -

F th i ti t


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Focus on the existing customers.

Spend less on the new customers.

lead nurturing campaigns-

In case of secondary steel sales, the bidder groupswere usually traders who were unfamiliar withcomputer/internet-based trading systems (Traditionalbania families dominated this trade.) The initial task ofmarket-making was to get this bidder group on-line.

mental-Junction.Internet mein auctionhoga dibbe mein yeh sab kam nahin hoga app ka dukaan bandh ho jayega

Mjunction organized extensive training oftraders.


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Content for later in the buying cycle.

Make sure that the buyer finds you rather than you finding the buyer.

Focus on the content which the buyer is looking for.

Aligning sales and marketing team.

Metaljunction interacts marketing and sales teams to create a single

pipeline for revenue.

Marketing should not be a cost center.

The conception sales deliver revenue and marketing as a cost centershould change. Investments in marketing should be justified on why

they are investing and ROI


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competitors

operates in a space which has very low barriers ofentry and where there are a number of competitors

Traditional trading

Globalplayers

www.e-steel.com

Metalspectrum not functional www.metalsite.com

One of the pioneers in b2b ,despite keeping careful tabs on the budget, like somany other dot-coms, simply ran out of cash.
http://www.e-steel.com/http://www.metalsite.com/http://www.metalsite.com/http://www.e-steel.com/http://www.e-steel.com/http://www.e-steel.com/


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Competitive advandage

TISCO being the 2nd cheapest producer on steel. Dynamic and innovative management team

Transparency

Simplicity

Flexibility- listen to our customers, identify pain points and

redesign processes to allay these pain points. services are built on a common platform-

thereby allowing to take advantage of common technology andtechnology infrastructure

Operates both on the buy and sell side of value chain

Customer orientation Value added services like financing and inspection,rebar services

Certificates for standard


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Certifications and awards

. Metaljunction also received ISO 9001:2000


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Management team

1.Viresh Oberoi, MD & CEOEducation: Business and Management Programmes

IIM - Ahmedabad, INSEAD - CEDEP - Fontainebleau, France and Harvard Business

School, Boston, USA

Joined TATA Steel in 1978 as a Sales Trainee

youngest Chief Sales Manager of Tata Steel.

the implementation of SAP in Tata Steel for which Viresh was the Project

Manager

2000, Viresh was selected to be the CEO of Tata Steel's latest jointventure with SAIL - metaljunction.com to etransform the steel supply

chain


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2.Ujjal Bhattacharya, Vice President, metaljunction,

valuejunction & autojunction

Ujjal is a Metallurgical Engineer from Institute of

Technology BHU and an MBA from XLRI

started his career with TATA Steel in July '84

mjunction since Nov'01.

10 years of experience in sales at TATA Steel.

Business Process Re-design in TATA Steel


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4.Soumya Sanyal, Head -FinancejunctionSoumyaleads the emerging practice area for Financial Solutions which provides

strategy, design and implementation for B2B market places.

5.Rajarshi Chattopadhyay, Company Secretary &Head - Finance

6.Deepak Bhattacharyya, Head - Coaljunction,

mjunction services limited Work Profile: Deepak has over 16 years of extensive experience in

the areas of e-commerce, sales and marketing, business

development and key account management


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SWOT ANALYSIS


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strength

The beautiful principle- aggregation

the aggregation of buyers and suppliers, demand and

supply on a common platform

entry barrier in terms of costs high

Value added services

Loyal customers


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weakness

Not always been able to differentiate themselvesas an auction service provider from other smallplayers it brings in pressure on margins

Digitization did not embrace the whole steeltrade ecosystem. Except for a few who buy steel from SAIL or Tata Steel, mJunction initiative

has not touched the bulk of the trade sector. has not also been successful

in embracing the primary steel sales

Didnt think beyond auction model of e-c for instance, online negotiations, online e-financing

and market-making?


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opportunity

Diversification

Primary steel- (they have already ventured into) Going global- scalability issue

to expand globally and is on the lookoutfor suitable mergers andacquisitions Ithas already invested over US$ 8.5 millioni n technologyand office space this yearand next years investment target is over

B2C segment- staightline.com

C2C segment The firm is now gearing up to conductauctions for retail surplus. Next year,it plans

to launch a new integratedauto e-commerce portal catering to allthree segmentsbusiness-to-business(B2B), business-to-consumer (B2C) andconsumer-to-consumer(C2C) by offeringspecialised services such as e-auction,e-classifieds, e-retailing

public offer (IPO)


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Threats Expansion into b2c,c2c, is it good for mjunction?

additional investment

Low volume in b2c-cost issues

Risk of crash-like other pioneers

Bulk of mjunction business right now is based on e-auctions that

unbundles the process of price discovery from other tradingprocesses. This unbundling, to the extent that it is achieved onthe ground, along with the reach afforded by internet basedtechnologies allow a more intense competitive market to springup around the auctions

International players- scalability issues

Logistic support partners??- cost?

competition


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Thank you GOD

Thank u everyone


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questions

Questions for Discussion:

1. How has an Indian e-commerce company likeMetaljunction Services Ltd., which primarily procures andsells commodities like steel and coal, managed to become

the largest e-market place for steel in the world?

2. Metaljunction should restrict its activities to the steelsector. Its expansion into varied sectors will have a negativeimpact on its core competency sector i.e. Steel.'Discuss.

What measures should the company take to expand itsoperations globally and become a global e-marketplace likealibaba.com, ariba.com or worldwideretailexchange.com

Metal junction case study

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