Foreign Exchange Risk Management For Export: A Project Report On

Foreign Exchange risk Management
A Project Report on
“Foreign exchange risk management for export”
AT
AUSTIN ENGINEERING CO. LTD
PATLA, JUNAGADH
Submitted to
The School of Management, Sumandeep Vidyapeeth
In the partial fulfilment of the award of the MBA Degree
Submitted by
Hiren Karia
SM20090014
Under the Guidance of
Faculty Guide Company Guide

Pinkal Shah Mr. Bhavesh Parmar
Lecturer Personnel Manager
School of Management “AEC”
Sumandeep Vidyapeeth Junagadh
Piparia, Vadodara Gujarat
July, 2010
1 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

Certificate
Of
Organisation

Certificate from school

of management

Declaration
I, undersigned, Hiren c Karia. a student of M.B.A. Hereby declare
that the project work presented in this report is my own work and has been
carried out under the supervision of Mr PINKAL SHAH of school of
management Sumandeep vidhyapitha University, Baroda.
The work has not been submitted previously to any other

University for any examination.
Date: Signature
Place: BARODA
(HIREN.C.KARIA)

PREFACE
The practical study is more important than theatrical study. Practical studies are the
part of M.B.A. course. M.B.A. is a special professional course regarding business. Practical
study implied by SUMANDEEP VIDHYAPITH UNIVERSITY in M.B.A
The summer Internship Training is very helpful to the students because students get
the practical knowledge about the working of industry and seeing the atmosphere of
business units. With the help of this SIP, student develops his awareness about business
field.
As a M.B.A. student, I had got an opportunity that how done practical Work in,
“AUSTIN ENGINEERING COMAPNY LTD”. It was a great experience for me. I have
tried my level best to get as possible as much better work in company. I thanked all
members who helped me to get information.
Place : BARODA
Date:

ACKNOWLEDGEMENT
It is great pleasure for me to submit this project report. It has provided a wonderful
learning experience.
“A needle alone cannot do anything, but when accompanied by a thread, it can stitch
good clothes. The same way without any practical experience, a person has to go through a
big challenge regarding this project.” I would like to all those persons who have helped me
directly or indirectly in completing this report.
First of all I would like to thank to director “PROF. B.S.PATEL” & ALL FACULTY
MEMBERS OF SCHOOL OF MANAGEMENT, SUMANDEEP VIDHYAPITH
UNIVERSITY for providing me an opportunity to get practical knowledge apart from
theoretical knowledge.
I would like to thank my project guide Mr. PINKAL SHAH for giving me great
guidance to make this report.
I would also like to thank my company guide of “AUSTIN ENGINEERING

COMPANY LTD.” & all the staff members, who have provided me all necessary
information.
I get chance to recognized my gratitude to director “PROF. B.S.PATEL” of “THE

SCHOOL OF MANEGEMENT”
I would like thank to my God because without his blessing no work can be completed,
I am also very thankful to my parents for their moral support during the project and the
people who directly or indirectly gives a fretfully on in preparing this report.
Place : BARODA
Date :

(HIREN KARIA)
Executive Summary
The topic of my project is ““Foreign exchange risk management for export”.

International business has not only contributed to the India growth. But has also helped in
explanation of Indian industry to the success of India. Today in international foreign
exchange risk is major problem in Indian industry so that I was chosen this topic for
reducing foreign exchange risk in this company. The project gave me great learning
experience at Austin engineering company ltd, Junagadh and also gave great experience in
corporate world. Where I got valuable knowledge of corporate sector and most of practical
knowledge in company that how to do business.
The objective of this project is, today, Loss in sale and purchase of product in Import
and Export Company because of currency daily fluctuation is one of the critical problems
which have direct affect to the company. The company occurs huge loss by this critical
problem, so that I have to decide that analysis of currency market fluctuation is great topic
for me and also for the company, Here my objective is also helpful to company minimise
foreign exchange risk .
Now the methodology of the research is secondary data collection. The whole data was
collected through company sales data of last two years in foreign transaction which are
collected from finance manager in company and other data are collected from RBI website
and www.NSEindia.com.Data is analyzed and presented in the form of excel sheet its
interpretation is given.

In the research time Researcher would came to know the fact that without hedging company
occurs huge losses in foreign market due to fluctuation of currency market so that company
should go for the hedging because it reduce the exchange rate volatility and that comes to
minor difference to actual received amount of sales.
Finding in this report in detail for both currency EURO and USD are as under.
without
Without hedging hedging ASSUM
EURO RECEIVABLE ACTUAL hedging Hedging % % %
TOTAL 581926366.2 29612787024 -717487 -571809 2.622 0.09847 10 %
TOTAL 581926366.2 29612787024 -717487 -564619 2.622 0.09716 7%
TOTAL 581926366.2 29612787024 -717487 -559826 2.622 0.09629 5%
TOTAL 581926366.2 29612787024 -717487 -555033 2.622 0.09542 3%

without
Without Hedgin hedging hedging ASSUM
USD RECEIVABLE ACTUAL hedging g % % %
TOTA
L 249427804.5 251220087.3 1792282.786 243208 2.212 0.097 10 %
TOTA
L 249427804.5 251220087.3 1792282.786 103818 2.212 0.054 7%
TOTA
L 249427804.5 251220087.3 1792282.786 238014 2.212 0.095 5%
TOTA
L 249427804.5 251220087.3 1792282.786 235937 2.212 0.094 3%
I would like to conclude the topic with little suggestion that Austin engineering co. ltd.
having huge business in euro and us dollar and this kind of currency is very volatile so just
to avoid exchange rate fluctuation company should go for the hedging in both the currency
due to that it will reduce fluctuation till negligible extend.

TABLE OF CONTENTS
Chap. No. PARTICULAR Page No.

1 Topic 10
2 2.1 Company Profile 29
2.2 Industry Profile 34
Over view of functional area 37
(a) Finance 38
3 (b) Marketing 41
(c) Human resources 48
(d) Operations 59
Model application 65
(a) Strategic Advantage Profile. 66
(b) Porter’s five forces model 67
(c) ETOP(environment threats and opportunity profile) 68
4 (d) BCG (model) 69
(e) Value chain 70
Research methodology 72
5.1 Objectives and purpose of the study 73
5.2 Scope of the study, Benefits of the study 73
5.3 Assumptions 73
5.4 Types of research design 73
5.5 Unit of Analysis 74
5
5.6 Methods of data Collection 74
5.7 Sampling if applicable 74
5.8 Appropriate tools for data analysis 74
5.9 Limitations of the study. 74
6 Data collection and analysis 75
7 Findings 86
8 Suggestion 89
BIBLIOGRAPHY AND ANNEXURE 91

Chapter – 1
Information
About Topic

1.1 SELECTION OF TOPIC

WHY
Today, Loss in sale and purchase of product in Import and Export Company because
of currency daily fluctuation is one of the critical problems which have direct affect to the
company. The company occurs huge loss by this critical problem, so that I have to decide
that analysis of currency market fluctuation is great topic for me and also for the company.
WHOM
The topic selection was done by the Finance as well as Export Department. Finance
department is brain of the company and taken decision for company’s growth. So Finance
department has given me ties topic for research work.
WHERE
The survey research about the comparison between Euro and US Dollar in minimize
loss in foreign exchange market in sales of bearing at Austin Engineering Company
Limited.
WHEN
The time period of this research is 1 May, 2010 to 30 June, 2010. Using the data of last three
years.
HOW
The research is done by company’s monthly sales data to analysis of sales data of
last two years in Austin Engineering co. ltd. Etc.


1.2 DEFINITION AND BACKGROUND INFORMATION

ABOUT THE TOPIC.
 INTRODUCTION OF INTERNATIONAL BUSINESS
International Business in India looks really lucrative and every passing day, it is
coming up with only more possibilities. The growth in the international business sector in
India is more than 7% annually. There is scope for more improvement if only the relations
with the neighbouring countries are stabilized. The mind-blowing performance of the stock
market in India has gathered all the more attention (in comparison to the other international
bourses). India definitely stands as an opportune place to explore business possibilities, with
its high-skilled manpower and budding middle class segment.
International business is a term used to collectively describe all commercial transactions

(private and governmental, sales, investments, logistics, and transportation) that take place
between two or more nations. Usually, private companies undertake such transactions for
profit; governments undertake them for profit and for political reasons.[1] It refers to all those
business activities which involves cross border transactions of goods, services, resources
between two or more nations. Transaction of economic resources include capital, skills,
people etc. for international production of physical goods and services such as finance,
banking, insurance, construction etc.
 Advantages of International Business
 Enhance your domestic competitiveness

 Increase sales and profits
 Gain your global market share
 Reduce dependence on existing markets
 Exploit international trade technology

 Reduce dependence on existing markets

 Exploit international trade technology
 Extend sales potential of existing products
 Stabilize seasonal market fluctuations
 Enhance potential for expansion of your business
 Sell excess production capacity
 Maintain cost competitiveness in your domestic market
 Disadvantages of International Business
 You may need to wait for long-term gains

 Hire staff to launch international trading
 Modify your product or packaging
 Develop new promotional material
 Incur added administrative costs
 Dedicate personnel for travelling
 Wait long for payments
 Apply for additional financing
 Deal with special licenses and regulations
 FOREIGN EXCHANGE MARKET IN INDIA
 INTRODUCTION
To buy foreign goods or services, or to invest in other countries, companies and

individuals may need to first buy the currency of the country with which they are doing
business. Generally, exporters prefer to be paid in their country’s currency or in U.S.
dollars, which are accepted all over the world.

When Canadians buy oil from Saudi Arabia they may pay in U.S. dollars and not in
Canadian dollars or Saudi riyals, even though the United States is not involved in the
transaction.
The foreign exchange market, or the "FX" market, is where the buying and selling of
different currencies takes place. The price of one currency in terms of another is called an
exchange rate.
The market itself is actually a worldwide network of traders, connected by telephone lines
and computer screens—there is no central headquarters. There are three main centres’ of
trading, which handle the majority of all FX transactions—United Kingdom, United States,
and Japan.
 History
Foreign exchange system in India - The central government in India has wide powers
to control transactions in foreign exchange. Until 1992 all foreign investments in India and
the repatriation of foreign capital required prior approval of the government. The Foreign-
Exchange Regulation Act, which governs foreign investment, rarely allowed foreign
majority holdings. However, a new foreign investment policy announced in July 1991
prescribed automatic approval for foreign investments in thirty-four industries designated
high priority, up to an equity limit of 51 percent. Initially the government required that a
company's automatic approval must rely on matching exports and dividend repatriation, but
in May 1992 this requirement was lifted, except for low-priority sectors. In 1994 foreign and
nonresident Indian investors were allowed to repatriate not only their profits but also their
capital. Indian exporters are also free to use their export earnings as they see fit. However,
transfer of capital abroad by Indian nationals is only permitted in special circumstances,
such as emigration. Foreign exchange in India is automatically made available for imports
for which import licenses are issued.
Because foreign-exchange transactions in India are so tightly controlled, Indian authorities

are able to manage the exchange rate, and from 1975 to 1992 the rupee was tied to a trade-
weighted basket of currencies. In February 1992, the government began moves to make the
rupee convertible, and in March 1993 a single floating exchange rate was implemented. In

July 1995, Rs31.81 were worth US$1, compared with Rs7.86 in 1980, Rs12.37 in 1985, and
Rs17.50 in 1990.
 DEFINITION OF FORGEIN MARKET
Global market in convertible currencies are traded and their conversion rates are
determined. It is the world's largest financial market in which every day, on average, some
one and one-half trillion dollar worth of currencies are bought and sold. Out of this only
about 15 percent is traded for goods or services, the balance 85 percent is traded by the
individual and institutional speculators.
CURRENCY IN INDIA
 INTRODUCTION
Currency is the means of purchasing through trade. Today, currency generally refers
to printed or minted money. Sometimes only paper bills are thought of as currency, while
other times coins are included. Currency involves the exchange of goods or services for
cash.
Exchange rates refer to a country's price for the trade of items. Floating currency
means that a country's exchange rate is not fixed or set in place by a main bank, but
fluctuates. Fixed currency, on the other hand, is set and is the opposite of floating currency.
Fixed currency is also called pegged currency and it is not commonly used, although it is
often associated with the Euro and the US Dollar (USD).
 DEFINITIONS
Spot: Foreign exchange spot trading is buying one currency with a different currency for
immediate delivery. The standard settlement convention for Foreign Exchange Spot trades is
T+2 days, i.e., two business days from the date of trade execution. An exception is the
USD/CAD (US – Canadian Dollars) currency pair which settles T+1. Rates for days other
than spot are always calculated with reference to spot rate.

Base Currency: In foreign exchange markets, the base currency is the first currency in a
currency pair. The second currency is called as the terms currency. Exchange rates are
quoted in per unit of the base currency. E.g. the expression Dollar – Rupee, tells you that the
Dollar is being quoted in terms of the Rupee. The Dollar is the base currency and the Rupee
is the terms currency.
 HISTROY
The origin of currency is the creation of a circulating medium of exchange based on
a unit of account which quickly becomes a store of value. Currency evolved from two basic
innovations, both of which had occurred by 2000 BC. Originally money was a form of
receipting grain stored in temple granaries in Sumer in ancient Mesopotamia, then Ancient
Egypt.
This first stage of currency, where metals were used to represent stored value, and symbols
to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500
years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era
where there was no place that was safe to store value, the value of a circulating medium
could only be as sound as the forces that defended that store. Trade could only reach as far
as the credibility of that military.
 Hierarchy of Currencies
As a whole, currencies can be listed in seven categories, namely top, patrician, elite,
plebeian, permeated, quasi and pseudo currency, with decreasing popularity on the world
market (Cohen, 1998). Those currencies are roughly divided into two groups, international
currency and national currency. The first three categories are international currencies while
the rest are national currencies. National currency only circulates in home country, while a
international currency is a widely accepted media of exchange and store of value.
International currencies are widely used outside its national border. Top currencies - the
most esteemed of international currencies - dominate most if not all types of cross-border
activities and their popularity is more or less universal, and there use is not limited to any
geographic region. Patrician currencies, which are used for various cross-border purposes,
while substantial, are something less dominant, while widespread, they are not universal.
 DERIVATIVES DEFINED
Derivative is a product whose value is derived from the value of one or more basic
variables, called bases (underlying asset, index, or reference rate), in a contractual manner.
The underlying asset can be equity, foreign exchange, commodity or any other asset. For
example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of
a change in prices by that date. Such a transaction is an example of a derivative. The price of
this derivative is driven by the spot price of wheat which is the "underlying".
In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines
"derivative" to include-
1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying
securities.
Derivatives are securities under the SC(R) A and hence the trading of derivatives is
governed by the regulatory framework under the SC(R) A.
The term derivative has also been defined in section 45U (a) of the RBI act as follows:
An instrument, to be settled at a future date, whose value is derived from change in

interest rate, foreign exchange rate, credit rating or credit index, price of securities (also
called “underlying”), or a combination of more than one of them and includes interest rate
swaps, forward rate agreements, foreign currency swaps, foreign currency-rupee swaps,
foreign currency options, foreign currency-rupee options or such other instruments as may
be specified by the Bank from time to time.
HEDGING
 Introduction
Risk management strategy used in limiting or offsetting probability of loss from
fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a
transfer of risk without buying insurance policies. It employs various techniques but,

basically, involves taking equal and opposite positions in two different markets (such as
cash and futures markets). Hedging is used also in protecting one's capital against effects of
inflation through investing in high-yield financial instruments (bonds, notes, shares), real
estate, or precious metals.
 Currency Hedging
Millions of people around the world invest their money in foreign currency – and it is the
most liquid market out there. There are many ways in which you can potentially make a lot
of money from currency exchange – and in this guide we shall look at the process of
Currency Hedging.
Hedging Presume Entity A is expecting a remittance for USD 1000 on 27 August 08. Wants
to lock in the foreign exchange rate today so that the value of inflow in Indian rupee terms is
safeguarded. The entity can do so by selling one contract of USDINR futures since one
contract is for USD 1000.
Presume that the current spot rate is Rs.43 and ‘USDINR 27 Aug 08’ contract is trading at
Rs.44.2500. Entity A shall do the following:
Sell one August contract today. The value of the contract is Rs.44,250.
Let us assume the RBI reference rate on August 27, 2008 is Rs.44.0000. The entity
shall sell on August 27, 2008, USD 1000 in the spot market and get Rs. 44,000. The futures
contract will settle at Rs.44.0000 (final settlement price = RBI reference rate). The return
from the futures transaction would be Rs. 250, i.e. (Rs. 44,250 – Rs. 44,000). As may be
observed, the effective rate for the remittance received by the entity A is Rs.44.2500
(Rs.44,000 + Rs.250)/1000, while spot rate on that date was Rs.44.0000. The entity was able
to hedge its exposure.
 Speculation: Bullish, buy futures

Take the case of a speculator who has a view on the direction of the market. He
would like to trade based on this view. He expects that the USD-INR rate presently at Rs.42,

is to go up in the next two-three months. How can he trade based on this belief? In case he
can buy dollars and hold it, by investing the necessary capital, he can profit if say the Rupee
depreciates to Rs.42.50. Assuming he buys USD 10000, it would require an investment of
Rs.4,20,000. If the exchange rate moves as he expected in the next three months, then he
shall make a profit of around Rs.10000. This works out to an annual return of around 4.76%.
It may please be noted that the cost of funds invested is not considered in computing this
return.
A speculator can take exactly the same position on the exchange rate by using
futures contracts. Let us see how this works. If the INR- USD is Rs.42 and the three month
futures trade at Rs.42.40. The minimum contract size is USD 1000. Therefore the speculator
may buy 10 contracts. The exposure shall be the same as above USD 10000. Presumably,
the margin may be around Rs.21,000. Three months later if the Rupee depreciates to Rs.
42.50 against USD, (on the day of expiration of the contract), the futures price shall
converge to the spot price (Rs. 42.50) and he makes a profit of Rs.1000 on an investment of
Rs.21,000. This works out to an annual return of 19 percent. Because of the leverage they
provide, futures form an attractive option for speculators.
 Speculation: Bearish, sell futures

Futures can be used by a speculator who believes that an underlying is over-valued
and is likely to see a fall in price. How can he trade based on his opinion? In the absence of
a deferral product, there wasn't much he could do to profit from his opinion. Today all he
needs to do is sell the futures.
Let us understand how this works. Typically futures move correspondingly with the
underlying, as long as there is sufficient liquidity in the market. If the underlying price rises,
so will the futures price. If the underlying price falls, so will the futures price. Now take the
case of the trader who expects to see a fall in the price of USD-INR. He sells one two-month
contract of futures on USD say at Rs. 42.20 (each contact for USD 1000). He pays a small
margin on the same. Two months later, when the futures contract expires, USD-INR rate let
us say is Rs.42. On the day of expiration, the spot and the futures price converges. He has
made a clean profit of 20 paisa per dollar. For the one contract that he sold, this works out to
be Rs.2000.
Q.1: What is Currency Hedging?

Currency hedging is essentially a way to minimize and control the risk that is involved in
any form of foreign investment strategy. The process of currency hedging attempts to
compensate for any changes in relative value of the specific currency being utilized in the
investment scheme.
The purpose of currency hedging schemes is that by minimizing the exposure of the investor
to negative shifts in the market, that the investor will still have a reasonable return on their
investment even if the specific market plunges.
Q.2: How does Currency Hedging Work?
The way that currency hedging works is that the investor converts or exchanges foreign
currency at a time when the exchange rate is particularly favourable. They would then make
the actual investment with currency that is native to the country in which the investment is
based.
For example, if an American-based investor wants to invest in an Australian company, using

the currency hedging technique they would first convert their U.S. dollars into Australian
dollars and then purchase the stocks in the Australian company using the native currency.
Another way that currency hedging can help protect the interests of the investor is by them
agreeing to sell share after a certain period of time. Typically the shares will be sold at a
lower rate than the exchange rate between the two currencies prior to the purchase of the
shares. However this puts the investor in a situation where the investor can make a
potentially substantial profit should the original currency (such as the U.S. dollar in our
previous example) strengthen against the other. Even if the original currency weakens, this
loss is offset by the contract to sell the shares.
Q.3: Main Benefits of Currency Hedging
The main benefit is the actual aim of currency hedging – to minimize loss and risks to the
investor. It is a great way of dealing with international investment opportunities. Even with
such good risk protection incorporated into the technique, the investor still has the same
ability to make substantial profits. Currency hedging gives investors the peace of mind to
invest in opportunities that would otherwise have been considered too volatile.

Currency hedging is perfect for long-term investors who do not have the time to check and
monitor his investment portfolio each day for fluctuations in the markets.
For those that are successful at currency hedging it can provide protection against
commodity price Exchanges, inflation, currency exchange rate prices and more. It also helps
traders survive through hard markets and economic depressions.
Futures:
A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. Futures contracts are special types of forward contracts
in the sense that they are standardized exchange traded contracts.
 DEFINITION OF CURRENCY FUTURES

A futures contract is a standardized contract, traded on an exchange, to buy or sell a
certain underlying asset or an instrument at a certain date in the future, at a specified price.
When the underlying asset is a commodity, e.g. Oil or Wheat, the contract is termed a
“commodity futures contract”. When the underlying is an exchange rate, the contract is
termed a “currency futures contract”.
In other words, it is a contract to exchange one currency for another currency at a

specified date and a specified rate in the future. Therefore, the buyer and the seller lock
themselves into an exchange rate for specific value or delivery date. Both parties of the
futures contract must fulfil their obligations on the settlement date.
 HOW FIRMS USE CURRENCY FUTURES
Corporations that have open positions in foreign currencies can consider purchase or selling
futures contracts to offset their positions.
 Purchasing futures to Hedge Payables:-
The purchase of future contracts locks in the price at which a firm can purchase a currency.
Example
Tetons company orders Canadian goods and upon delivery will need to send C$500,000 to
the Canadian exporter. Thus, Tetons purchase Canadian dollar futures contracts today,

thereby locking in the price to be paid for Canadian dollars at a future settlement date. By
holding futures contract, Tetons does not have to worry about changes in the spot rate of the
Canadian dollar over time.
 Selling Futures to Hedge Payables
The sale of futures contract locks in the price at which a firm can sell currency.
Example
Karla Company sells future contract when its plans to receive the currency from exporting
that it will not need. By selling a future contract, karla company lock in the price at which it
will be able to sale this currency as of the settlement date. Such an action can be appropriate
if Karla expects the foreign currency to depreciate against Karla’s home currency.
 Closing out a futures position
If a firm that by a currency futures contract decides before the settlement date that it know
longer wants to maintain its position, it close out the position by selling an identical future
contract. The gain or loss to the firm from its previous future position is depends on the
price of purchasing future versus selling futures.
The price of future contract changes overtime in accordance with movements in this spot
rate and also with changing expectation about the spot rate’s value as of the settlement date.
If the spot rate of a currency increases substantially over a one month period, the future
prices will likely increases by about the same amount. In this case, the purchase and
subsequent sale of future contract would be profitable. Conversely, a decline in the spot rate
over time will corresponds with a decline in a currency future price, meaning that the
purchase and subsequent sales of futures contract would result in a loss. Will the purchaser
of the futures contract could decide not to close out their position under such condition, the
losses from that position could increase over time.
 FUTURES TERMINOLOGY
Spot price: The price at which an asset trades in the spot market. In the case of USDINR,
spot value is T + 2.
Futures price: The price at which the futures contract trades in the futures market.

Contract cycle: The period over which a contract trades. The currency futures contracts on
the NSE have one-month, two-month, three-month up to twelve-month expiry cycles.
Hence, NSE will have 12 contracts outstanding at any given point in time.
Value Date/Final Settlement Date: The last business day of the month will be termed the
Value date / Final Settlement date of each contract. The last business day would be taken to
the same as that for Inter-bank Settlements in Mumbai. The rules for Inter-bank Settlements,
including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as
laid down by FEDAI (Foreign Exchange Dealers Association of India).
Expiry date: It is the date specified in the futures contract. This is the last day on which the
contract will be traded, at the end of which it will cease to exist. The last trading day will be
two business days prior to the Value date / Final Settlement Date.
Contract size: The amount of asset that has to be delivered under one contract. Also called
as lot size. In the case of USDINR it is USD 1000.
Basis: In the context of financial futures, basis can be defined as the futures price minus the
spot price. There will be a different basis for each delivery month for each contract. In a
normal market, basis will be positive. This reflects that futures prices normally exceed spot
prices.
Cost of carry: The relationship between futures prices and spot prices can be summarized
in terms of what is known as the cost of carry. This measures (in commodity markets) the
storage cost plus the interest that is paid to finance or ‘carry’ the asset till delivery less the
income earned on the asset. For equity derivatives carry cost is the rate of interest.
Initial margin: The amount that must be deposited in the margin account at the time a
futures contract is first entered into is known as initial margin.
Marking-to-market: In the futures market, at the end of each trading day, the margin
account is adjusted to reflect the investor's gain or loss depending upon the futures closing
price. This is called marking-to-market.
Maintenance margin: This is somewhat lower than the initial margin. This is set to ensure
that the balance in the margin account never becomes negative. If the balance in the margin
account falls below the maintenance margin, the investor receives a margin call and is

expected to top up the margin account to the initial margin level before trading commences
on the next day.
1.3 IDENTIFYING THE VARIABLES AND PARAMETERS FOR THE
PARTICULAR STUDY. ESTABLISH THE THEORETICAL

RELATIONSHIP AMONG VARIABLES.
Variables
Identification of variable
 Euro/INR
 US$/INR
 SALES OF THE COMPANY/INR
Theoretical Relationship Among variables
The foreign exchange market is the market in which national currencies are traded.
As in any market, a price must exist at which trade can occur (Woodbury 1999). An
exchange rate is the price of a unit of domestic currency against a foreign currency. If the
exchange rate of the US dollar is higher than the Japanese yen, the US dollar has
depreciated and the yen has appreciated.
The US dollar managed to hold its ground after losing some momentum against the
euro after the release of the second estimate of Q1 2010 GDP came in below expectations at
3.0 percent. In other news, US jobless claims decreased to 4,607 from 4,656 for the week
ending May 15. Look for the dollar to hold close to current levels ahead of thin trading
conditions with the US Memorial Holiday next Monday
The euro remained stronger against the dollar after officials from China and Kuwait
reiterated that they will continue to maintain currency reserves in the single currency. Look
for the euro to hold onto today's gains as it tries to push higher as investors move back into
riskier assets.

LITERATURE REVIEW
Currency competition between
Euro and us dollar
Name of Researcher:- Li Wenhao
Paper No. 18, June 2004
Working Papers of the, Business Institute Berlin at the
Berlin School of Economics (FHW-Berlin)
Badensche Str. 50-51, D-10825
Conclusion
The US dollar has been the dominant international currency. With the inauguration of the
euro in the year 1999, the euro has become the most powerful potential opponent for the
dollar in the international monetary and financial market. Depending on the size of the
member countries of the Euro area, the euro will become comparable not only in
international trade, but also on GDP to the US dollar. Will this shock or big event to the
international monetary system cause further diversification out of dollar? Will the euro have
the chance to challenge the dollar or even replace it as the world leader? Although opinions
differed, the mainstream economists argued that the euro after its creation would more likely
appreciate than depreciate. In any event, nobody appears to have anticipated the magnitude
and speed of the depreciation of euro since 1999. This paper puts forward a number of
explanations for the euro’s weaknesses since its debut depending on various kinds of
models. Both fundamentals and expectations are among possible reasons, but unfortunately,
most of them are not satisfactory.
2. Operational Hedging: A Review with Discussion
Onur Boyabatlı

Technology Management
INSEAD
77305 Fontainebleau, France
Conclusion
In summary, while the existing definitions of operational hedging in operations

management capture the fundamental principles of operational hedging, they are not
complete or fully consistent with the usage in other academic fields. We believe that there is
room in operations management for an operational hedging framework that incorporates and
unifies findings from other fields.
Intense market competition and high levels of economic and technological

uncertainties inherent in the business environment fuel the growth in corporate-level risk
management programs. According to the finance literature, there are several sources of
market imperfections that make volatility costly to firms and that can be managed through
firm-level risk management activities. Financial instruments are effective in managing the
exposures dependent on asset prices such as exchange rate, interest rate and commodity
price. However, many firms have risks stemming from their operations that are not tradable
in capital markets by means of financial contracts. For this reason, operational hedging -
drawing on operational tools to hedge risks - constitutes an important component of firm-
level risk management programs. Indeed, empirical research shows that firms employ
operational means to manage their risk exposures (Allayannis et al. 2001, Pantzalis et al.
2001)
3. Hedging versus not hedging: strategies for managing
Foreign exchange transaction exposure
Name of Researcher: - Scott McCarthy
Senior Lecturer in Finance
Queensland University of Technology
Brisbane, Queensland, Australia
Contact: Tel.: +61 7 3864 5390;

Fax: +61 7 3864 1500;
Email: s.mccarthy@qut.edu.au
Conclusion
The general conclusion that can be drawn from the results is that over the period
considered, always hedging is preferable to remaining unhedged for an exporter with an
AUD exposure while remaining unhedge is superior to always hedging for both the SGD
and JPY. The finding concerning the AUD is supportive of those who argue that firms with
an exposure should always Hedge as their comparative advantage is not in predicting
exchange rate movements. With regard to the selective hedging alternatives, the random
walk model performed well, especially so for AUD exposures. The conclusions drawn from
the findings for the SGD and the JPY are not what would generally be recommended to a
firm. On a short term or one off basis this would be extremely dangerous as an adverse
exchange rate movement may cause substantial financial Damage, but the results suggest
that for firms that have exposures repeatedly over a long period of time that hedging offers
no benefit.
In terms of further research, it would be of interest to extend the study to consider

other currencies though it does become difficult in this region with fixed or at least pegged
exchange rates.

Chapter – 2
INFORMATION
ABOUT THE COMPANY

2.1 COMPANY PROFILE
HISTORY, GROWTH & DEVELOPMENT OF COMPANY
The history of “Austin Engineering Co. Limited” started 34 years ago i.e. in 1973 in those
year, there was a great need for some good automatic industry in the field of bearing,
particularly in Saurashtra region. A term of five top qualified persons decided to produce
higher bearing and thus, established a partnership firm namely “ACCURATE
ENGINEERING” in 1973.
On 27th July 1978, due to rapid development and increment in demand of

bearing, it was converted into private limited company. The company at that time was
located at G.I.D.C. estate in Junagadh city.
The growth and development kept on increasing and in 2 nd November, 1985 this
company was converted into public limited under the name “Austin Engineering
Company Limited” and purchase the trade mark “AEC” in the year 1994. Because of some
problems such as shortage of paper supply in appropriate place for expansion etc. “Austin
Engineering Company Limited” has established its second unit, on 15th February, 1987,
which is located at Patla, a village nearly 25 km away from Junagadh.
In the initial years this company was producing only 40 to 50 varieties of

bearing. Today it produced 4500 of bearing. A good and efficient working staff and
management had leaded the company world of manufacturing. At present the condition of
his industry is very good. The process of this company is going on day by day.
A good and efficient working staff and management leads to company would be
manufacturing at present the condition of this industry in sound a progressing day by day.
Company introduce themselves as one of die-leading manufacturing of antifriction rolling
bearing on India. The company are in this field since last 37 years.

“AUSTIN ENGINEERING COMPANY LTD” Patla, Junagadh (“AEC” Brand) the unit
has been awarded an ISO / TS 16949: 2002 certified Certification.
Now, company would like to idea about their sales. Company’s last year’s sales
were 21 lakhs pieces. Such as the U.S.A. & European Union, nation 85% was direct supply
to OEM’s and actual users such as:
 Indian Defence: Automotive Manufactures

 Steel Rolling Mills : gear box Manufacturing
 Rolling Mills Machinery Manufacturing : Pumps manufactures
 Materials Handling Equipment Manufactures: Papers & Pulp Industries.
 Construction Equipment Manufactures: Mining Industries.
 State owned Public Transport services: Power generation plants.
 On rate contract U.P sugar Co-op. and Corporation also approved by FAG, India. An
then rest was to Indian replacement (After Market).
Company manufacture all types of metric and inch services ball and roller bearings. That is
single and multi raw radial, angular and thrust contact types ball bearings, cylindrical roller
bearings, spherical roller bearing, and needle roller bearings.
Fast development and Flexible manufacturing system are out strength. Company can
develop and manufactures bearing and components falling in their manufacturing range
within two months with flexible manufacturing system. They can manufacture small
practically viable batches.

Milestone
The AUSTIN ENGINEERING COMPANY is one of the leading manufacturers of Ball & Roller
Bearings in India. It was founded by five technocrats as Partnership Firm in 1973.
Today the company has developed into a Public Limited Company, with full array of high quality
and precision bearings for different applications. The company’s stringent quality assurance system
has earned ISO 9001:1994 accreditation for the plant located near Junagadh in Gujarat.
1973  Partnership firm formed by five technocrats.

 Started manufacturing needle roller cage assemblies with the manpower of 10 and
the capital investment of 3500 US dollar.
1974  Started manufacturing cylindrical roller bearings and deep groove ball bearings up to
Outside Diameter of 50 mm.
1975  Started manufacturing Single row Spherical roller bearing for steering application in
Telco‘s Light and Heavy commercial vehicles having Mercedes – Benz
collaboration.
1978  Partnership firm converted into private limited company.
 Started manufacturing tapered roller bearing up to outside dia. of 100 mm.
1980  Manufacturing capacity of all aforesaid bearings increased up to outside diameter of
150 mm.
1982  Started supplying bearings for gearbox application to Premier Automobiles Limited
(Fiat – Italy collaboration) for their passenger cars.
1984  Started supplying case – carburised specially heat treated ground components
(exclusive supplier) and king – pin bearings to TELCO for their light and heavy
commercial vehicles. (Mercedes – Benz collaboration).
1985  Converted into public limited company and shares / stocks offered to public.
1986  New plant (unit –2) started with installation of machineries and testing / measuring
equipments imported from the Germany, U.K. and the United States of America.
 Started exporting bearings to developed nations such as the U.S.A., the U.K., Italy,
and other E.U. countries.
1987  Entered into a manufacturing of import substitute bearings for battle tanks and light

and heavy armed vehicles of Indian Defence department.

1990  Manufacturing capacity increased up to outside diameter of 600 mm.
 Started manufacturing large dia. double row tapered and spherical roller bearings.
1991  Awarded indefinite rate contract by Association of State Road Transport
Undertakings of India (A.S.R.T.U.) for 78 sizes of bearings for their passenger
vehicles.
1993  Started manufacturing flexible roller bearings.
 Started manufacturing of multi-row cylindrical roller bearings for Sendzimir cold
strip mills.
1995  Manufacturing capacity increased up to outside diameter of 800 mm.
1997  Started manufacturing flush ground single row angular contact ball bearings for the
U.S.A. and European market.
1998  Participated in global tender floated by Bokaro steel plant and secured order for two
sizes of large dia. four row tapered roller bearings. (Roll-neck application).
 Started production of four row tapered roller and multi row cylindrical roller
bearings for roll-neck application in steel plant.
1999  Awarded ISO 9001 certification for design and manufacturing of all types of rolling
bearings from TÜV Rheinland certification body.
2000  Establishment of AEC Europe S.r.l. in Milan (Italy) and started working with
globally well known bearing manufacturers.
2001  Became approved supplier to one of the world leading bearing manufacturer.
 Commenced supplies of bearings including coal mill bearings to thermal power
stations.
2002  Developed stainless steel (Grade 440 C) bearings – ball cylynrical and needle
bearing for atomic energy application.
 Developed and supplied slewing ring bearings, ringing OD from 250 mm to 600 mm.
 Upgraded from ISO 9001 : 1994 to ISO 9001 : 2000.
2003  RDSO (Indian Railways Source and Quality accrediting sole authority) Approval
received for loco transmission bearings.
2004  Developed QJ 200 & QJ 300 series for export markets. Also developed 3200 and
3300 Series for Export.
2006  Awarded ISO / TS 16949 : 2002 by TÜV Rhineland
2008  Company has entered in Export house
WHO’S WHO: - ORGANISATION CHART

2.2 INDUSTRY PROFILE

Competitive Scenario
Now a day, we can see competition in almost every field up to some extent. Competition
affects the customers, sales figures and other aspects of marketing. A healthy competition
may prove beneficial but cut throat competition may create hazardous effect on the
company.
As far as Austin is concerned, it faces no competition at local level because it is

having the largest range of bearings in Asia. Still it has some competitors in the country but
they all are in collaboration with foreign companies while Austin is not having any such
collaboration. So it is the plus point. The competitors are of Austin industries which are as
under.
 SKF
 NBC
 FAG
 RHG
 KOYO
 NTN
The Company has in monopolistic market so there is a large number of buyers and large
number of sellers.
Market Share
Industry Life Cycle & Growth.
The product life cycle concept describes the various stages in the life of a product from
introduction to decline. A product which is introduced will eventually die out but the
number of year in each stage, particularly the ones generating maximum yield.
Austin is continues growth because year by year increase his profit. So that we can say that
Austin is now on the stage of growth in the industrial life cycle.

Environmental Framework
ECONOMIC:-
Economic factors which generally affect company environments are:
Interest rates, productivity, employment, income, inflation and wealth, availability of credit
facility that influence of market from company services, employees care services with staff
care services.
The relationship between economic growth and Bearing Industries Growth rate can be given
by:-
High Economic Growth=High Industrial Production=High Demand for Electricity=more
sales in also other countries. The economic growth of India and countries, such as USA and
Australia that are huge market. As a result any economic growth rate and Bearing Industries
growth rate goes highly in today’s market.
SOCIAL ENVIRONMENT:-
Social environment is generally which affects people live, believes, values and norms.
Social environment affects the industry in the greater way because company serves health
related benefits for societal benefits.
One of the most important Aspect of Austin is to create awareness among people important
of health care and infection control.
The Social environment of Austin is affected by both internal and external factors.
 The company is affected by some internal environment are: Employees

stagnancy, Responsibility, Payment benefits, ethicality in work.
 Similarly there are some external factors which affect which affect social
environment of the Hospital are: - Relationship with customer and other corporate
organization, Customerization, privative measures, satisfaction level, Affordability,
operative measures, preventive measures, Behaviour etc.

TECHNOLOGICAL ENVIRONMENT:-
Technology plays a vital role in today’s scenario without upgraded technology any firm
cannot be run for last long. In Austin if we talk about technology, the first thing comes to
any one mind is updated machinery or technical instrument including management
functions. Technological environment affects both the internal and external source in
company.
POLITICAL/LEGAL ENVIRONMENT: -
Political environment is composed of laws government agencies & pressure groups that influence
and limit various organizations and individuals. Many times these laws create opportunities for the
organization.
 Sets the basic rules for how a business cannot operate in society.
 Without legalization the company can make its place on the market.
 The legal aspect also includes the government. Because the highest authority is the
government.

Chapter – 3
OVERVIEW
OF
FUNCTIONAL AREA

3.1 OVERVIEW OF FUNCTIONAL AREA

(a) FINANCE
INRODUCTION
Finance is the thing which converts the plans into reality. In the past days, there was
a narrow approach regarding this important factor i.e. the procurement of funds was of only
importance in financial management. But now, a broader scope of this has been developed
which includes in addition to procurement of funds and efficient use of resources.
The theme of financial management is structure round the decision making in the
three inter related financial areas: Investment – long term as well as current assets.
Financing and dividend policy. Also included are the important tools of financial planning
and management.
The relationships for financial management are spread throughout the organization in the
sense that financial management is, to an extent, an integral part of the job for the managers
involved in planning, allocation of resources and control. Financial decision is of crucial
importance. It is, therefore, essential to set up an efficient organization for financial
management function.
FINANCIAL PLANNING
Financial planning refers to the planning regarding procurement, utilization and

control of funds required by the firm. The decisions regarding planning of these inter related
financial areas are taken under this. The areas are:
Investment decision – long term as well as current assets
 Financing decision
 Dividend Policy decision
The planning is the first step and so other steps in financial management are
dependent in it. So it is very important to plan it efficiently so that it will be beneficial for
the firm in future.

In Austin, the financial planning is done on the basis of time period. Thus, there
are three types of financial planning in the company: short term, medium term and long
term. Short term planning is done for one year, medium term is for five years and ling term
is for ten years. Short term planning is used to fulfil the requirements of day to day expenses
and production, medium term is used to increase working capital and funds to replace the
machines and long term planning is used for expansion and modernization.
Planning Period Purposes

Short term 1 Production and day to day expenses
Medium term 5 To increase working capital and
funds to replace machines
Long term 10 Expansion and modernization
SOURCES OF FINANCE
Financial management involves the three important areas: investment decision,

financing decision and dividend policy decision. Among them, the investment decision is
the first step to be taken up by the owners. This involves the decisions regarding the
procurement of funds. So it is necessary to study the different sources of finance available.
This decides the cost of capital. So the sources you select to procure the funds should be
such that they would minimize the cost of capital. The terms and conditions of different
institutions should be studied and compared while taking the decision about borrowed
capital. The balance between owned and borrowed capital should also be kept in mind at
that time.
At the initial stage of business firm, generally capital is brought by the owner and
some outside institutions, banks etc. But when the business starts growing, the reinvestment
of profits becomes also an important source of capital.
Here, Austin is a public limited company. So it is having share capital as a major

source of finance. Some borrowed capital is also brought in the company. Moreover, now
the retained earnings have also become an important source of finance for the company. The
sources of finance are as under:
 Equity Share Capital

 Bank of Baroda
 ICICI Bank
CAPITALIZAITON
Capitalization means total among of long term funds available to the company
which includes shares and debentures, issued by the company and also long term loans
taken from financial institutions. As far as earned profits remained to be distributed are
concerned or it is necessary to classify them as either capital surplus or revenue surplus. The
amount of capitalization should be only that much which can be justified by the profits and
by the normal rate of return for the industry.
 Over Capitalization:
A company is said to be over capitalized if its earnings are less in relation to its
capital investment. The company may be having a low earning capacity. Thus, it results in
over capitalization.
 Under Capitalization:
A company is said to be undercapitalized if its earnings are more in relation to

its capital investment. Under capitalization is an indication of effective and proper
utilization of funds employed in the business. Under capitalization indicates sound financial
position and good management of the company.
Austin’s earnings are Rs.3, 73, 10,646 and investment is Rs. 12, 47, 61,492. Thus,
earnings are less than investment. So we can say that the company is over capitalized.
MANAGEMENT OF FIXED ASSETS
Assets, representing economic resources, are the valuable possessions owned by

the firm. These possessions owned by the firm should be capable of being measured in
monetary terms. Assets are of two types:
 TANGIBLE ASSETS:
They are the assets which have physical existence and generate goods and
services. It includes land, machinery, equipment, furniture etc.
 INTANGIBLE ASSETS:

They are the assets, which do not generate goods and services directly and have
no physical existence. It includes patents, copyrights, goodwill, trademarks etc.
(b) Marketing
INTRODUCTION
Marketing is so basic that it cannot be considered a separate function. It is the

whole business seen from the customer’s point of view. Business success is not determined
by the producer but by the customer. Today, companies find themselves competing in a race
where the road signs and rules keep changing, where there is no finish line, no permanent
“win”. They simply must keep racing, hopefully in a direction where the public want them
to go.
Marketing management, today, is a subject of growing interest in all types of

organizations within and outside the business sector in all kinds of circumstances. It is the
conscious effort to achieve desired exchange outcomes with the target markets. The
marketer’s basic skill lies in influencing the level, timing and composition of demand for a
product, service, organization, place person or idea.
PRODUCT MIX
Product mix plays an important role while determining the pricing policy of any
organization. It can be defined as the set of products offered for sale by a company. It shows
the mix of different characteristics of the products of the company, means the total number
of products are included on product mix is a list of all product offered by a company.
Any company’s product mix has a certain width, length, depth and consistency.
Width : - It refers to how many different product lines the company carries
Length : - It refers to total number of items in the mix.
Depth : - it refers to how many variants are offered in each line of product.
Consistency : - It refers to how closely relate the various product lines to each other.
In Austin, the product mix can be explained by a chart shown below.

From above chart, we can see that Austin is having only one product line i.e.
bearing which also can be said the width of the product mix. The length of the product mix
is having six different types of bearings and under that they have various sizes under each
type. Thus, total items they are producing are about 3000 different bearings in size and type.
When we talk about consistency, all the products are related in channels of distribution,
consumer needs and other factors because f a common product line.
MARKET SEGMENTATION
Market consists of buyers, and buyers differ in one or more respects. They may
differ in their wants, purchasing power, geographical locations, buying attitudes and buying
practices. Any of these variables can be used to segment a market.
It is a process of dividing the total market for goods and services into small
groups, such that the members of each group are similar with respect to factors that
influence demand. It is a strategy of ‘divide and conquer’ i.e. dicing market in order to
conquer them. Its philosophy is something for everybody within practicable limits. It
enables the market to give better attention to the selection of the customer and offer an
appropriate marketing mix for each segment for a group of buyers having homogeneous
demand.
In Austin, they have selected target market to satisfy the wants of customers. They
have divided the target market in different division.
 Indian defence department

 Steel plants and steel rolling mills
 Textile machinery manufactures
 Power plants
 Automotive industries
 Indian railways
 Process industries

 State toad transport undertakings throughout India

 Overseas customer in the USA, the UK. EU nations etc.
 Replacement market/after market

MARKETING RESEARCH
In the long history of the business, management devoted of its attention to

managing money, material, machines and men. But today, management has recognized the
critical importance of fifth resources, information. Well known companies know that what,
where, how, and when of their customers and this is done through paper marketing research.
Every firm must organize the flow of marketing through proper marketing research. Every
firm must organize the flow of marketing information of its marketing manager. Companies
are studying their mangers information need and designing marketing information system to
meet these needs.
Marketing research is a the systematic design, collection, analysis and reporting

if data and findings relevant to a specific marketing situation the company in other words, it
is a process of collection, organizing, analyzing and interpreting the public views regarding
the product, their demand, their suggestion etc. towards improvement and modification of a
product. For a stable and continuous market, market research is a must.
There are various methods of marketing research. By appropriate method, companies can do
the marketing research. These are as follows:
 Survey method
 Observation method
 Panel method
 Experiment method
Among all these methods, Austin generally uses any of these methods as per
requirement. According to marketing research of the co., they think that it is important
because it can give firsthand knowledge of the customer and change in pattern of demand. It
is also useful in formulation market strategies. Price, brand and package etc. are the areas of
marketing research. To collect data, they use multi-media like survey, panel approach,
experiment approach, observation etc.

PRICING POLICY
Price is the exchange value of product or service, which is expressed in terms of

money. It is the only element in marketing mix which produces revenue: the other elements
produce costs. Price is also one of the most flexible elements of the marketing mix, in that it
can be changed quickly, unlike product features and channel commitments. Decision about
pricing means the pricing policy is considered important aspect for success of marketing of
any product for any organization. While formulating pricing policy, the following questions
should be kept in mind:
 How should a price be set on a product or service for the first time?
 How should the price be adopted over time and space to meet varying circumstances
and opportunities?
 When should the company initiate the price change, and how should it respond to a
competitor’s price change?
Austin is manufacturing industrial goods. Consumers but are used for making
the final product do not directly use bearing. There are different prices for different types
and sizes of bearing. The cost of production is also considered while pricing. Moreover, the
price depends on other factors like bulk purchasing and the prices are set by the competitors.
Thus the pricing policy of Austin is formulated by the following factors.
 Cost of production
 Quantity of good purchased
 Size and type of the product
 Price of the competitors’ product.
SALES PROMOTION
Sales promotion refers to the promotion activities, which stimulates consumer

purchasing like displays, exhibitions, show rooms, demonstrations, free samples, coupons,
premiums, contests and many other selling efforts. It is an important instrument in
marketing to lubricate the marketing efforts. Today, sales promotion is a necessary and not
expense but it is an investment, which can pay rich dividends. Sales promotion is a vital link
between advertising and personal selling. It aims at stimulating consumers’ purchasing at

point of sale and at retail channel of distribution, particularly because retailing is highly
competitive. In short, by sales promotion all prospective buyers are attracted, urged and
even persuaded to buy the product.
Austin has paid attention to sales promotion because of its vital role in increasing
sales. It uses sales promotion at consumer level and dealer level. They promote sales by
giving gifts to the consumers and dealers like dairies, paper weights, clocks, pens key chain
etc.
ADVETISING
Nothing except mint can make money without advertising. Advertising is any
paid form of non promotion of ideas, goods or services by an identified responsive. It is a
form of mass communication and paid by seller who wants to communicate about his
product or services to his customers. It is a very important promotional tool in the hands of
marketing manager. The adviser or the sponsor wants to persuade and induce the readers,
viewers or listeners to take some action and i.e. to buy the advertised products, so that the
advertiser has profitable sales. It appears in the recognized media such as T.V., magazines,
radio, newspapers, hoarding, posters etc.
Austin is one of the leading companies in manufacturing of bearings and as it

has selected O.E.M. (Original Equipment Manufacturer) as largest market, the company
does not require advertising its product goods rather than consumer goods. If the company
fined the need of advertisement, it advertises the product in print media and by hoarding.
PUBLICITY
Publicity has now become important marketing function. The total process of
building goodwill towards a business enterprise and securing a bright image of the company
is called public relations. It creates a favourable atmosphere for conducting business.
There are four groups of public:
 Customers
 Shareholders
 Employees

 The community
The marketers should have the best possible relations with these groups.
Effective marketing communication is not possible without establishing and maintaining
mutual understanding between the company and its customers. Publicity works as a
lubricant for making the wheels of marketing run smoothly.
Austin always accepts the sponsorships or cultural programs, sports

organizations and tournaments to make effective publicity. Sometimes it also gives free of
charge products to these organizations, which run for the purpose of social services and
public welfare.
CHANNELS OF DISTRIBUTION
Distribution channel decisions require a special attention as this involves long

term commitments to the other firms with whom marketer enters into contracts. The most
fundamental factor for channel choice and channel management is the economic criteria i.e.
cost and profits. But there are number of other factors such as nature of the products, market
trends, competition outlook, pricing policies, typical consumer needs and manufacturer
himself who should be considered. There are two types of channel:
 Direct Channel
 Indirect Channel
Austin is producing bearings and i.e. industrial goods. So in this case, direct
channel will be more effective than indirect channel. So the company mostly uses direct
channel of distribution and i.e.
Manufacturer  Consumer
For replacement market, the company uses indirect channel of distribution. For
this, they appointed zone wise dealers under whom sub dealers are appointed. This channel
is as under:
Manufacturer  Distributors  Dealers  Consumers

INTERNATIONAL MARKETING
Because of globalization, the international marketing has now become important

for any business. International marketing makes the product of the company world class and
this affects the goodwill of the company positively. It is also important from the view point
of government because international marketing attracts the foreign customers and earns
valuable foreign exchange.
Austin has given importance to international marketing by which they have

created and are maintaining the customers worldwide. They have established branches for
marketing in Italy and U.S.A. The countries in which they are having export customers are:
 Italy
 U.S.A.
 U.A.E.
 Sri Lanka
 Argentina
 New Zealand
By international marketing, the company faces international competition and so

the product is more qualitative as compared to other domestic producers. The company
exports 50% of its total production, which earns valuable foreign exchange.
CUSTOMER SERVICES
Customers services are to determine the customer needs and which satisfying
them. The ascertain and introduces certain standard of services and insure the satisfaction of
customer.
The objective of the company for the customer services is to getting the right
good to right place at right time for least cost. The company provide better services to
customer like better credit that is three to six months, reasonable price and satisfy the
customer, quality assurance. Timely delivery and easy availability of product.

The company inform the customer if the ideal time goes long in case of the
unavailable circumstances.
RESEARCH AND DEVELOPMENT
Progress is needed at every stage and time in any business to be successful. For
this, continuous research and development are undertaken. The demand of customer needs is
necessary for the business.
Austin has a separate research and development department in which the designs
of new and innovative products are developed. The company has developed 3000 sizes in
different types of bearings and still it is developing. The average is 7-8 new designs for
bearing and its components per month are developed in this department. So the company is
still developing in the 32nd year from its establishment.
(c) Human Resource

INTRODUCTION
To achieve the organizational objectives, it is necessary to coordinate the

resources of the organization, i.e., four important resources, which are, man, money,
material and machinery. Among all these, man is of extreme importance because it is like
the driver of a vehicle. A vehicle is of no use until it is driven by someone. Just like this,
machines, materials, and money are of no use until they are coordinated by man. It is also of
paramount importance in the success of any organization because most of the problems in
the organizational settings are of human and social rather than physical, technical or
economic.
The management must therefore be aware not only of the organizational needs
but also of employee needs. The management of “men” is very important and challenging
job, important because it is a job, not of managing “men” but of administering a social
system. The management of men is a challenging task because of the dynamic nature of
people.
Man power management relates to procedures through which human resources

are organized and directed towards the attainment of organizational, social, and individual

goals, moreover human resource is a delicate subject and often it matters more to ‘ who
says’ something than to know ‘what’ he says. If human resource is properly utilized, it may
prove a dynamic motive force of running an enterprise.
ORGANISTAIONAL STRUCTURE
Man power is blood of organization. In the company the day to day affairs are
managed by the team of professional managers under the supervision of managing director
who is headed by the chairman of the company.
In “Austin Engineering Company Ltd” there is a separate human resource department

where all the functions regarding human resource are performed.
RECRUITMENT, SELECTION AND INDUCTION
RECRUITMENT:
Recruitment is the process of searching of prospective employee and simulating them

to apply for job in the organization. In other words it is a linking activity, bringing together
those with jobs and those seeking jobs. Recruiting makes it possible to acquire the number
and types of people necessary to ensure the continued operation of the organization. There
are two sources of recruitment:
 Internal Sources;
 Promotion
 Transfer

 Demotion
 External Sources;
 Advertisement
 Employment exchange
 Labour union
 Gate hiring
 Private agencies
 Professional bodies
 Personnel consultant
 Colleges, universities and technical institute.
In Austin, they are using both internal and external sources. Their policy for recruiting
the person through external source is such that, first they give advertisement in newspapers
and they also contact the employment exchanges. Through three sources, i.e., first of all
they collect applications; scrutinize applications received and thereafter appropriate
candidates are called for interviews.
SELECTION
Selection is the process by which the qualified personnel can be chosen from the
applicants who have been offered their service to the organization for employment. Thus the
hands of management differentiate the qualified and unqualified applicants by applying
various techniques such as interviews, tests, etc. In this sense, it is a negative process of
employment in which only a few who are qualified for the job are offered for employment
and others are dented of the opportunities.
Company selects employees through selection committees made of three

members. One of them is works manager, second is manager then third is head of
department. First qualification wise, applications are separated, appropriate candidates are
called for interviews and selection committee conducts interview. For technical candidates,
they have to test technical knowledge.
Thus, selection policy passes through the following steps in Austin Engineering Company
Ltd
 Formation of selection committee.

 Selection committee conducts interview.
 Checking of references.
 Physical examination.
 Placement.
INDUCTION
When a candidate is finally selected, he or she is issued with an appointment letter and is
asked to join the organization on a specified date. Induction is the follow up action hiring
and concerned with the problem of introducing a new employee to the organization.
After appointing a new candidate, he or she is introduced with the other staff. Concerned
officer makes him aware about rules and regulations of the company.
TRAINING AND DEVELOPMENT
The performance of a person depends on his ability to work and the type of
training he receives. Most of the organizations undertake same king of training for their
employees. In Indian organizations, training and development activities have assumed high
importance in recent years because of their contribution to the achievement of
organizational goals.
TRAINING
Training is the act of increasing the knowledge and skills of an employee for a doing a
particular job. It is generally linked with operational tasks and goal of the organization. It
gives an awareness of rules and procedure to guide their behaviour. It attempts to improve
their performance on the current job to prepare them for an intended job. Training enables
employees to perform their present job in a better way.
Training has become very important act recently in India because of its contribution to
the achievement of organizational objectives. Moreover, it increases employee morale,
reduces supervision, labour problems, accidents and wastage, increases production and
fulfils words; there are various types of training, which are as under:
 On the job training

 Off the job training

Austin uses training program for the workers who are doing machine work.
They have adopted on the job training method for six months and after that a test is
undertaken, then the performance is checked and then the employee is employed
permanently.
DEVELOPMENT
Development is a long term educational process utilizing a systematic and

organized procedure by which managerial personnel’s procedures get conceptual and
theoretical knowledge. In other words, it refers to not only to technical knowledge and skills
in operation but to philosophical and theoretical educational concepts. It includes broader
education and its purpose is long term and over all development. It covers not only those
activities which improve job performance but also those which bring about growth of
personality, help individuals in the progress toward maturity and actualization of their
potential capacities. So that they became not only good employees but better persons also.
The development programs are linked with the future needs of the organization
and help the employees’ n acquisition of skills and competence needed for future
managerial position. In Austin, development program is not held for executives, but the
officers are often called for meetings, seminars, conference and providing some important
information regarding the company.
JOB ANALYSIS
While manpower inventory is concerned with telling ‘what employees can do’,
job analysis assesses ‘what employees are doing’. From job analysis, specific details of what
is being done and the skills utilized in the job, is obtained. Job analysis enables managers to
understand jobs and job structures to improve work flow or develop techniques to improve
production. It also involves job design or redesign, coordinating demands on available time,
individual psychological needs, technical procedures and desired performance.
 Job identification
 Significant characteristic of a job
 What materials and equipment a worker uses?
 How a job is performed?

 Required personnel attribute
JOB DESCRIPTION
It is written record of duties, responsibilities and recruitment of a particular job. It is

concerned with the job excel and not with the work. It’s a statement describing the job in
such term as its title, location, duties, working conditions and hazards. In other words, it
tells us ‘what is to be done’ and ‘how it is to be done’ and ‘why’. It is a statement of
function, in that it defines the appropriate and authorized contents of a job.
In Austin, job description is used to formulated manpower management policies and

managerial development through the continuous construction with line managers. It
supervises recruitment, selection and placement of personnel job description. It is used for
taking the decision of promotion and transfer of employees. It is also used for the
adjustment of grievances, evaluation of job and for wage and salary administration.
JOB SPECIFICATION
It is a statement of human qualifications necessary to do the job. It usually contains items

such as education, experience, training, skills, special attitude, premeditative, emotional
characteristics etc. In short job specification is a statement of minimum acceptable human
qualities necessary for the proper performance of a job.
In the company, they have developed appropriate job specifications for different types of
jobs. This statement is used while selecting a candidate for a particular job so that the work
done by him or her will result in efficiency and development of over all organization.
PROMOTION AND TRANSFER POLICIY
Promotion and transfer provide workforce flexibility and mobility to suit the
requirement of the organization. They are the activities through which an adjustment in the
size of workforce of an enterprise in workforce may be needed to meet special situations
such as changes in organizational structure, fluctuations in volume of production and
employment.
 PROMOTION:

‘Promotion’ is a term which covers a change and calls for greater responsibilities and
usually involves higher pay and better terms and conditions of service and therefore, a
higher status or rank. A promotion is a vertical move in rank and responsibilities.
Promotions have a salutary effect on the satisfaction of the promoted person’s needs for
esteem, belonging and security.
While establishing the promotion policy of an organization two bases for promotion are
taken into consideration
 Seniority
 Merit
Austin is having the promotion policy based on both merit as well as seniority. If vacancy
arises in the company firstly selection is being made from internal sources. If any qualified
employee is found there, he is given promotion. While giving promotion, management has
to check work performance regularly and seniority of such employee.
 TRANSFER:
A transfer is a horizontal or lateral movement of an employee from one job, section,

department, shift, plant or position to another at the same of\r another place where his
salary, status and responsibilities are the same. Generally, employees are transferred to the
positions where they are likely to be more effective or where they are likely to get more job
satisfaction. Thus, we can say that the transfer is a process of employee’s adjustment with
the work, time and place. In this unit, there is no tendency of employee transfer.
WAGE AND SALARY ADMINISTRATION
‘Wage and salary administration’ is concerned with establishment and

implementation of sound policies and practices to employee compensation. IT involves the
areas or relevant organizational problems, development and maintenance of wage structure,
establishing rules for administrating wages, wage payments, profit sharing, wage cages and
adjustments, supplementary payments, control of compensation costs and other related
terms. A sound wage and salary administration tries to achieve objectives which are
beneficial for both employees and employers.

As far as Austin is concerned, wages are being pain on monthly basis. The date
of wage payment is done on 7th of every month. From the amount of salary, the amount
contributed for provident fund is deducted and then, the remaining amount is paid. The
company pays wages as per Minimum Wages Act to all its workers.
BENEFITS AND SERVICES
Benefits and service are the things that attract a worker’s attention and stimulate
him/ her to work. It influences the individual and group performance. So the H.R. can be
precious asset for the organization. The benefits and services attract the employees and it
also reduces employee turnover.
The benefits and services provided by Austin to their employees are as under:
 BONUS FACILITY
Generally, all companies give bonus once in a year to their workers. Austin also provide
bonus to each and every employee once in a year up to some percentage of their total salary
and wages with gifts also.
BUS FACILITY
Austin is situated far away from the city Junagadh, so the workers living in city are provided
bus facility by the company so that there will not be any problem for employees regarding
transportation.
MEDICAL FACILITY
Austin provides medical facilities to the workers for their better safety. They have appointed
doctors for that, Dr. Trambadia, Dr. Thakkar, Dr. Vaishnav and Dr. Dadania.
LOAN FACILITY
The company provides loan to its employees without interest. This includes home loans,
loans for furniture, vehicles, etc.
SAFETY DEVICES
The company provides same safety devices to the workers of production department.
Because some treatment of this department may be hazardous for the worker.

CANTEEN FACILITY
The company provides canteen facility to the workers. In which worker can get lunch and
other snacks at reasonable rate.
OTHER FACILITIES
It includes the facility of free telephone service at home for the executive personnel working
in the company.
NUMBER OF EMPLOYEES
Among the employees, all are not even as far as the skills are concerned. So the distribution
of worker according to their skills is as under.
Skilled worker : 390
Semiskilled : 263
Unskilled : 7
From above distinction, the unskilled and semiskilled workers are given training so that they
can give the best of them to the organization. The list of employees is as under.
PERFORMANCE APPRAISAL SYSTEM
Performance appraisal is the step where the management finds out how effective
it has been at hiring and placing employees. When an employee does his/her work well, the
employee naturally wants to be praised and recognized by his boss and fellow-workers.
Appraisal satisfies human need for esteem by others and for self esteem. Performance
appraisal is one of the most motivator. So that, most of the firms include this system to
make efficient human resource management.
Austin has adopted a systematic appraisal system according to which:
Firstly, work given to an employee is properly observed.

Secondly, they have to see whether the employee is superior to the complete the job
entrusted to him or her and if he/she is able, then he/she is appraised. They have kept secret
records for the workers to avoid any disturbance. This system is useful to take decisions
regarding promotion and other rewards for the work done by the employees.
Performance appraisal
Production Attendance Attitude
INDUSTRIAL RELATIONS
‘Industrial relation’ refer to dynamic and developing concept which is not

limited to the complex of relations between trade unions and management but also refers to
the general web of relationship normally between the employees and employers – a web
much complex than simple concept of labour – management conflicts. Industrial relations
pose one of the most delicate and complex problems of modern industrial society. Labour –
employer relationship have become more complex that they were in past and have been
given a clear sharp edge because of widespread labour unrest. In the circumstances, a clear
understanding of the unrest and which are likely eliminate it would be a rewarding
experience for anyone who is interested in industrial harmony.
The industrial relations in Austin are good enough for the efficiency of the unit.
Here, the employees are motivated properly and are given performance appraisal. So they
are satisfied with their employers. On the other hand, employees are putting their efforts in
the direction of growth of the organization. So the employers are also satisfied with their
employees. Moreover, employee-employer relations are also quite satisfied.
GREIVANCE HANDLING SYSTEM
A grievance is any discontent or dissatisfaction, whether expressed or not,

whether sad or not, arising out of anything connected with the company which on employee
thinks, believes or even feels to be unfair, unjust or inequitable. Whenever there is any
discontent among employees, it is bound to result in a turmoil which may affect the interests

of the management very adversely. Grievances generally give rise to unhappiness

frustration, discontent, and indifference at work, poor morale and they ultimately lead to the
inefficiency of workers low production.
In Austin, grievances arise rarely and if there is any, then it is solved immediately before it
makes a dynamic nature.
The policy that the company has to solve grievances is such that first of all, workers contact
H.O.D regarding their problem. Then, H.O.D consults with personnel department and with
the consultation of H.O.D and personnel manager, grievances are solved.
TIME KEEPING SYSTEM
A time keeping system is useful to establish control and facilitate discipline in

the organization. By establishing good time keeping system, the management can
implement its planning effectively. So the target can be achieved easily. It also plays an
important role in smooth running of the activities of an organization.
Austin is having a separate time keeping department. This department notes the arrival and
departure of every employee. Ere, each worker is provided an identity care. No worker can
enter in the company without that card. The facility of issuing gate apses is to the visitors.
Company’s plant runs in 3 shifts, timings of which are as under:
Time keeping system:
Sr. No. Shift Time Working hours Recess time

1 1st 06.00am to 8 10.00pm to
02.00pm 10.30pm
nd
2 2 02.00pm to 8 06.00pm to
10.00pm 06.30pm
rd
3 3 10.00pm to 8 03.00am to
06.00am 03.30pm
4 General 08.00am to 8 12.00pm to
04.30pm 12.30pm

OTHER INFORMATION
Provident fund
The object of the provident fund scheme is to save certain amount by each
employee which acts as a source of finance after their retirement. The accumulated fund is
reimbursed in case of retirement, death or dismissal of employee. If employee leaves and
joins other organization covered under PF scheme, the account is subject to transfer
This company provides 24% of the salary as PF. Out of this 24%, the company contributes
10 and the employee the rest. Thus 12 % by company and 12 % by employee.
The company provides 8.33% of salary as family pension. In case of death of employee, the
co. provides the total amount in PF in addition with 1.6% of the salary of dead employee
(d) OPERATIONS
INTRODUCTION
Production is accepted as the main cause of a business by all. It is the core activity
by which a business unit reaches its main objectives and i.e. profit. Production can be said
the weapon for this. It plays a very important part in any business firm because the other
activities and departments of the unit are also dependent on this activity.
AUSTIN is a standard company in the production of bearings. They are

producing different types of bearings which are as under:
 Ball bearings
 Needle roller bearings
 Thrust bearings
 Spherical roller bearings
 Tapered bearings
 Cylindrical roller bearings
PRODUCTION PLANNING AND CONTROL
In any business, before starting production process, it is very important to plan

about that production. This includes the forecasting about the various elements of

production. In other words, how much production will be undertaken, in how much time it
should be compared etc. decisions are not taken in this stage. But if those decisions are not
taken properly, there will be wastage of raw material, time, money as well as manpower and
the company may start occurring losses.
AUSTIN plans its production according to the orders they have got for the
production. So, the company as far as the control is concerned, the production is controlled
by the works manager at the different stages of production.
PRODUCTION PROCESS.
Manufacturing process is a process conduced to procedure of manufacture the

product. This is the basic or the main process because each and every activity is depending
on manufacturing process. Following are the raw materials in producing various size of
bearing and the components brought out:
 Steel Bars and Tubes

 Steel Wire
 Steel Ball
 CRCA Sheets
 Races
 Rollers
STAGES OF MANUFACTURING PROCESS
1. Material stage
Raw material is steel bars, steel wire, steel tubes, rollers etc. This company has improved
sophisticated plant and machinery especially from Germany. As the company has to reach
big orders of export market defence on big original equipment manufacturers. So, company
kept six months inventory for raw material and has make contact with their supplier of raw
materials to supply regularly.
Main suppliers in India are:

 Mahindra and Mahindra Ltd.

 India Seen less Mattel Tubes Ltd.
 Suman Das Udyog
 Specific Steel Ltd.
 Meedumra Industry Ltd.
They store this raw material in store room and when required they inspect and test then
in terms fitness for further production process which are according to purchase order.
2. Turning of Races and Roller:
This is the second stage of step for manufacturing the proper bearing from the raw material
to the finished product. In this stage the races and roller are turned in required sizes by
trained workers and then it is transferred to main unit.
3. Heat Treatment
This is the 3rd stage in this stage all the races and roller are given heat through electric rollers
are given heat through electric furnace at 845 to 855 temperatures through which defective
pieces are removed. It means the testing of races and roller is done to measure the capacity
of the products.
4. Grinding of Races and Rollers
This is the 4th stage, after heat treatment, the part of races and rollers and refined. Inner and
outer part of racer and rollers are given through the grinding machine.
5. Tapping, Happing and Super Finishing
In this stage there are checking of rollers and races because it has single mistake of defect in
outer and inner side of races and rollers. If any aces and roller is defective that pieces is
tapped and happed. Than offer, super finishing will be done on that part. There are done
through their respective machine.
6. Inspection and Grinding

After the procedure for making a bearing all the races and rollers are inspired by the
inspection department and then after grades fixed by the company, the precious sample is
gone mass production.
7. Assembling, Cleaning, Oiling and Packing
There are separate department of bearing all kind of bearing are managed and its size,
quality and shapes is measured and its size, quality and shapes is measured bearing are
assembled. After the assembling of the bearing, the cleaning and oiling of bearing is done
and then the bearing finally goes at packing department where this bearing has given “AEC”
trade mark.
8. Storage and Dispatch
After passing through all the above stage the finished product are stored in go down. From
where they are dispatched as per the order. The transportation capacity is mainly done by
Transport Company.
Production process chart

TIME KEEPING SYSTEM
Time keeping system means how many shifts are there in one day in a particular
company. Time keeping system is much more important in controlling the organization.
The purpose of time system is to established control and facilitated employees discipline.
Now a day’s company is using time keeping system so that the arrival and departure can
make easily.

In “Austin Engineering Company Limited”, there are here about 750 workers.
For a time keeping there is a card system. Every employee given a card having none of the
person and serial number on that card, timing is also written. Time keeping officer notes the
coming and going time out of the company.
This company is working throughout 24 hours a day. The working hours are divided in
to 3 shifts. Every worker is work to 8 hours in the day. Overtime system is available in this
company.
We are showing the different shifts are as under:
Shift Timing Hours

First 6.00 p.m. to 02.00 p.m. 8
POLLUTION Secon 02.00 p.m. to 10.00 p.m. 8 CONTROL
d
Here, Third 10.00 a.m. to 06.00a.m. 8 pollution control
refers to the contribution of the
unit in controlling of pollution. It means the activities of the unit should not be such that
pollute the environment. AUSTIN is not doing any such activity and its product doesn’t
pollute the valuable environment. The plant of the company is located far away from the
city. So it is not harmful for the population of the city. Thus the product is not hazardous for
the environment.
QUALITY CONTROL
The maintenance of the quality is very important for a reputed firm. When the
product of the company is proved qualitative, the company should maintain the same quality
standard, because it is useful in creation of customers, to increase market share, to stay in
competitive etc.
Here, “Austin Engineering Company Ltd.” has given special attention on the quality of the
product. It is also an ISO 9001:2000 awarded company because of its quality. Moreover,

they have developed a QUALITY POLICY for better quality control. The company is also
having certain testing instruments for testing the product at different levels. The product
process includes five inspection stages which show the company’s efforts to maintain its
quality. Thus, there is a great attention given to quality control in the company.
Testing instruments
 Spectrometer
 Micro handless tester
 Magna field crack detection
 Carbon-supper apparatus
 Surface roughness tester
 Roundness tester
 Electronic comparator
 Air gauge comparator
 Dial calibrators
 Redial clearance measuring instrument

Chapter – 4
MODEL APPLICATION
4.1 MODEL APPLICATION

(a) Strategic Advantage Profile
The Strategic Advantage Profile i.e. SAP analysis of Austin is nothing but the strength and
the weakness of the Austin. It includes every aspect, SAP analyze to help company present
scenario and helps to make necessary modifications from its growth & development and
also to know at which place company is lacking.

Areas Performance Importance

Strength Weakness Rating
GOOD POOR Neutral Minor Major High Medium Low
MARKETING
1. Company 
Reputation
2. Market Share 
3. Customer 
Satisfaction
4. Customer Retention 
5. Product Quality 
6. Service Quality 
7. Pricing 
8. Distribution 
Effectiveness
FINANCE(BILLING & CREDIT CELL)
1. Cost of Capital 
2. Cash Flow 
3. Financial Stability 
4. Financial Growth 
HUMAN RESOURCES
Recruitment and 
selection
Training and 
development
Job performance 
Wage and salary 
Production department
production process  
Quality control 
Pollution control 
(b) Porter’s 5 Forces Model:
Michael Porter has identified 5 forces that determine long-run attractiveness of a

market or market segment they are as follow:
Industry competitors, Potential entrants, Substitutes, Buyers and Suppliers.

It helps us to understand market scenario and competition & take fair steps for the growth
and development of the organization. Moreover, one can take various steps in the areas
where we lack and strengthen the organization with new strategies for remaining in the
competition.
Potential entrants
Supplier’s Buyers
power Power
INDUSTRY
Threat of
substitute
THERAT OF SEGMENT RIVALRY: - This explains us that the segment is unattractive if it

already contains number strong competitors. And even more unattractive if it’s stable or
declining.
THREAT OF NEW ENTRANTS: - Austin engineering has set some policies for its entrants.
It has to keep complete protection about how it provides best services with cost effective to
be strong in market to give best competition. Because if any of its revivals get to know its
strategy, they can work on in and gain huge market in the services.
THREAT OF SUBSTITUTE PRODUCTS:-Any segment is unattractive if there are actual

substitutes. It sets limits on price & profit. Austin too has many substitutes which have to be
dealt with care. If any new advanced technology in field of industry services & equipments
is out with its rivals it will create big impact on Austin.
THREAT OF SUPPLIERS GROWING BARGAINING POWER: - In this segment,

Industry supplier is able to raise price or reduce quality of the product. This applies in the
area of instrument purchase.

THREAT OF BUYERS GROWING BARGAINING POWER: - The segment is

unattractive if buyer possesses strong bargaining power. Bargaining power grows when they
become more organized, when the services is undifferentiated, customer switching costs are
low & are price sensitive because of low profits.
(C ) ETOP (Environmental Threat & Opportunity Profile)
ENVIRONMENTA THREATS: -
 Austin’s one of the most important threats is upcoming corporate industry in
providing best services.
 Today still there are many reputed company in Gujarat which give Austin toughest
competition in market.
OPPORTUNITY PROFILE: -
 Austin’s has great opportunity in future.

 Austin considering New Assets Acquisition in the organization.
 Austin is the Expansion Plans of the organization.
Env. Factors Threats Neutral Opportunities

-3 -2 -1 0 1 2 3
Economic
1.Int. rate
*
2.Productive
*
3.Income
*
Social factors
Employees and staff services
*
Employees responsibility
*
Payment benefits
*
Ethicality in work
*
Technological factors
Upgrade technology
*
Efficiency of machinery
*
Political Factors
Operate Rules and regulation
*
Government interfere
*
Total -6 0 12
Here In the company over all opportunities is more than the threat in Environmental Factors.
Today, company productive is highly efficiency. So that here opportunity for more sales in
market. But in political Factors, company cannot adopt all rules and regulation so it is also
affected to the company.
(d) BCG (Model)

BCG Matrix is basically based on the study of the review note. It is a study of relation
between market share and market growth. And, the level of high and low rating scale is
classified.
BCG Matrix Model:
Stars: - Stars are high growth businesses or products competing in markets where they are
relatively strong compared with the competition. Need of the heavy investment is necessary
to sustain growth.
So, in here, the company relates to heavy investment and in return the heavy returns for their
customers.
Cash Cows: - Cash cows are low-growth businesses or products with a relatively high
market share. These are mature, successful businesses with relatively little need for
investment. They need to be managed for continued profit - so that they continue to generate
the strong cash flows that the company needs for its Stars.
Now, Austin is in the cash cows stage in present.

Question Marks: - Question marks are businesses or products with low market share but
which operate in higher growth markets. This suggests that they have potential, but may
require substantial investment in order to grow market share at the expense of more
powerful competitors.
Dogs:- The term "dogs" refers to businesses or products that have low relative share in
unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they
are rarely, if ever, worth investing in.
Austin Engineering Company now in cash cow stage. But company has good opportunity in
future because most of the factors are in the favour of company and growth rate of company
is also high.
So that if company can enter in stage of STARS in future so company must adopted all
opportunity today for better future in Bearing industry.
(e) Value Chain

The value chain as a tool for identifying ways to create more customer value. Every firm is a
synthesis of activities that are performed to design, produce, and market, deliver, and
support its product. Value chain identifies nine value creating activities consist of five
primary activities and four support activities.
1. Inbound Logistics:
Bringing new material into the business is the purpose of the inbound logistics.
2. Operations:
Operation relates with the motive, goal and subject. A specific goal for the inputs made
in the inbound stage. So, we have to define a goal for the inputs made.
3. Outbound Logistics:
It relates to the finished goods. The product now are been manufactured and are ready
to be launched into the market for their sales and stacks.

4. Marketing & Sales:
The marketing and sales plays a vital role in the part of the product manufacturing for
the company because if marketing is done in a proper way then it is obvious that the
sales of the oil would take place.
5. Services:
It leads the after sales services and the in - stock services given by the company. The
services provided to the customers of the company also plays major role in success of
product launch.

Chapter – 5
RESEARCH METHODOLOGY

5.1 OBJECTIVE OF RESEARCH
 To know about the company’s functional area system that which type of system in
each department in company.
 To know existing exposure of Foreign Exchange Risk.
 Devices strategy to minimize foreign Risk in Company’s export business.
5.2 Scope of the Study
 The time period of this research is within two month at Austin Engineering Co. Ltd.
Basically secondary data collection of the last three years.
 This Research is only for company’s export and foreign exchange risk in the Austin
Engineering Company Ltd.
5.3 Benefits of the Study
For Company
 To decreases the company foreign exchange Risk in sales of company.

 To know that how much time period company’s gives for credit.
 Company have idea about both the currency that Euro and USD which is more
benefit for the company in sales of product.
For Reader
 It can be very useful and gives guidance to those who is research in future in this
area.
5.4 Assumptions
 There is exestuation of vitality in Euro & USD against INR.

 It is assumes that there is no Brokerage and taxation with hedging ( Possible
assumption)
 It is assumes that the foreign exchange quota of foreign exchange taken to device
hedging strategy is available in market.

5.5 Type of Research design
In this Research I will go take a DESCRIPTIVE RESEARCH DESIGN because the

variable is well known and well define. As well as aware about the problem and subject of
the research and also we have idea about solving this particular problem in company.
5.6 Unit of Analysis
 Euro/INR
 US$/INR
 SALES OF THE COMPANY/INR
5.7 Appropriate tools for data analysis
 Measurement of standard deviation

 Central tendency
 Hedging ratio
5.8 Method of data collection
 Secondary data collection method
5.9 Limitation of the study
 The limitation for the research of topic is awareness of time period and other factor
is Cost.
 Data is closed so there is a chance of deviation in actual situation.
 The data for research is also less.
 It is assumes that the foreign exchange quota of foreign exchange taken to device
hedging strategy is available in market.

Chapter – 6
DATA COLLECTION
&
ANALYSIS OF DATA

Sales in Exch Exch Exch rate of Future

Invoice Date EURO Rate Due Date Rate 10%
30-04-2008 364117 63.0028 15-05-2008 65.84 65.90584
31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599
30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878
31-07-2008 476570 67.566 15-08-2008 63.8 63.8638
31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595
30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591
31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157
30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647
31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474
31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621
28-02-2009 409339 62.97 15-03-2009 66.59 66.65659
31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598
30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738
31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666
30-06-2009 284179 67 15-07-2009 68.37 68.43837
31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877
31-08-2009 225007 68.951 15-09-2009 71.06 71.13106
30-09-2009 243977 70.47 15-10-2009 68.62 68.68862
31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899
30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826
31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588
31-01-2010 231407 65.7125 15-02-2010 63 63.063
28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259
31-03-2010 267389 61.764 15-04-2010 60.53 60.59053
6.1 DATA COLLECTION
The data for invoice, due date and sales in EURO is collecting form the company
The data for invoice, due date and sales in euro is collecting form the company
The spot rate get form the site of RBI
The data for future exchange rate I had assumed 10 %

DATA COLLECTION OF SALES IN EURO OF LAST TWO YEARS

Sales in Exch
Invoice Date EURO Rate Due Date Exch Rate Exch rate of Future 7%
30-04-2008 364117 63.0028 15-05-2008 65.84 65.886088
31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599
30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878
31-07-2008 476570 67.566 15-08-2008 63.8 63.8638
31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595
30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591
31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157
30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647
31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474
31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621
28-02-2009 409339 62.97 15-03-2009 66.59 66.65659
31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598
30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738
31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666
30-06-2009 284179 67 15-07-2009 68.37 68.43837
31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877
31-08-2009 225007 68.951 15-09-2009 71.06 71.13106
30-09-2009 243977 70.47 15-10-2009 68.62 68.68862
31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826
31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588
31-01-2010 231407 65.7125 15-02-2010 63 63.063
28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259
31-03-2010 267389 61.764 15-04-2010 60.53 60.59053


Sales in Exch
30-04-2008 364117 63.0028 15-05-2008 65.84 65.87292
31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599
30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878
31-07-2008 476570 67.566 15-08-2008 63.8 63.8638
31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595
30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591
31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157
30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647
31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474
31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621
28-02-2009 409339 62.97 15-03-2009 66.59 66.65659
31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598
30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738
31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666
30-06-2009 284179 67 15-07-2009 68.37 68.43837
31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877
31-08-2009 225007 68.951 15-09-2009 71.06 71.13106
30-09-2009 243977 70.47 15-10-2009 68.62 68.68862
31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899

30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826
31-12-2009 221020 68.1785 15-01-2010 65.88 65.94588
31-01-2010 231407 65.7125 15-02-2010 63 63.063
28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259
31-03-2010 267389 61.764 15-04-2010 60.53 60.59053


Sales in Exch
30-04-2008 364117 63.0028 15-05-2008 65.84 65.859752
31-05-2008 430939 65.5315 15-06-2008 65.9900 66.05599
30-06-2008 483397 66.6061 15-07-2008 68.78 68.84878
31-07-2008 476570 67.566 15-08-2008 63.8 63.8638
31-08-2008 381508 64.4647 15-09-2008 65.95 66.01595
30-09-2008 485900 65.5485 15-10-2008 65.91 65.97591
31-10-2008 366132 64.8127 15-11-2008 61.57 61.63157
30-11-2008 460247 62.3578 15-12-2008 64.7 64.7647
31-12-2008 483998 65.7033 15-01-2009 64.74 64.80474
31-01-2009 567735 65.0885 15-02-2009 62.1 62.1621
28-02-2009 409339 62.97 15-03-2009 66.59 66.65659
31-03-2009 537658 66.9094 15-04-2009 65.98 66.04598
30-04-2009 401428 65.8518 15-05-2009 67.38 67.44738
31-05-2009 435209 66.1895 15-06-2009 66.6 66.6666
30-06-2009 284179 67 15-07-2009 68.37 68.43837
31-07-2009 319118 68.2517 15-08-2009 68.77 68.83877
31-08-2009 225007 68.951 15-09-2009 71.06 71.13106
30-09-2009 243977 70.47 15-10-2009 68.62 68.68862
31-10-2009 222401 69.2857 15-11-2009 68.99 69.05899
30-11-2009 272203 69.2552 15-12-2009 68.26 68.32826

65.88
31-12-2009 221020 68.1785 15-01-2010 65.94588
31-01-2010 231407 65.7125 15-02-2010 63 63.063
28-02-2010 270448 63.4189 15-03-2010 62.59 62.65259
31-03-2010 267389 61.764 15-04-2010 60.53 60.59053

DATA COLLECTION OF SALES IN USD OF LAST TWO YEARS

Sales in Exch Exch
Invoice Date USD Rate Due Date Rate Exchge rate of future at 10%
30-04-2008 245619 40.0277 15-05-2008 42.400 42.4424
31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429
30-06-2008 322251 42.82 15-07-2008 43.17 43.21317
31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323
31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594
30-09-2008 299578 45.564 15-10-2008 48.43 48.47843
31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899
30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794
31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908
31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872
28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158
31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988
30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955
31-05-2009 254369 48.534 15-06-2009 47.94 47.98794
30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872
31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868
31-08-2009 137556 48.337 15-09-2009 48.57 48.61857
30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591
31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664
31-12-2009 138496 46.63 15-01-2010 45.67 45.71567
31-01-2010 141788 45.963 15-02-2010 46.38 46.42638
28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558
31-03-2010 155564 45.498 15-04-2010 44.38 44.42438
The data for invoice, due date and sales in USD is collecting form the company


Exch Exch
Invoice Date Sales in USD Rate Due Date Rate Exch rate of future At 7%
30-04-2008 245619 40.0277 15-05-2008 42.400 42.430
31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429
30-06-2008 322251 42.82 15-07-2008 43.17 43.21317
31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323
31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594
30-09-2008 299578 45.564 15-10-2008 48.43 48.47843
31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899
30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794
31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908
31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872
28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158
31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988
30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955
31-05-2009 254369 48.534 15-06-2009 47.94 47.98794
30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872
31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868
31-08-2009 137556 48.337 15-09-2009 48.57 48.61857
30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591
31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664
31-12-2009 138496 46.63 15-01-2010 45.67 45.71567
31-01-2010 141788 45.963 15-02-2010 46.38 46.42638
28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558
31-03-2010 155564 45.498 15-04-2010 44.38 44.42438

Invoice Date Sales in USD Exch Rate Due Date Exch Rate At 5 %
30-04-2008 245619 40.0277 15-05-2008 42.400 42.421
31-05-2008 287305 42.1255 15-06-2008 42.9 42.943
30-06-2008 322251 42.82 15-07-2008 43.17 43.213
31-07-2008 322155 42.8365 15-08-2008 43.23 43.273
31-08-2008 245469 42.9389 15-09-2008 45.94 45.986
30-09-2008 299578 45.564 15-10-2008 48.43 48.478
31-10-2008 209077 48.6422 15-11-2008 48.99 49.039
30-11-2008 251003 49.0033 15-12-2008 47.94 47.988
31-12-2008 280184 48.6419 15-01-2009 49.08 49.129
31-01-2009 324299 48.8345 15-02-2009 48.72 48.769
28-02-2009 224429 49.2222 15-03-2009 51.58 51.632
31-03-2009 300939 51.2315 15-04-2009 49.88 49.930
30-04-2009 226303 50.0618 15-05-2009 49.55 49.600
31-05-2009 254369 48.534 15-06-2009 47.94 47.988
30-06-2009 170805 47.7736 15-07-2009 48.72 48.769
31-07-2009 192555 48.4765 15-08-2009 48.68 48.729
31-08-2009 137556 48.337 15-09-2009 48.57 48.619
30-09-2009 152118 48.4389 15-10-2009 45.91 45.956
31-10-2009 141348 46.721 15-11-2009 46.09 46.136

30-11-2009 174159 46.569 15-12-2009 46.64 46.687
31-12-2009 138496 46.63 15-01-2010 45.67 45.716
31-01-2010 141788 45.963 15-02-2010 46.38 46.426
28-02-2010 158673 46.3257 15-03-2010 45.58 45.626
31-03-2010 155564 45.498 15-04-2010 44.38 44.424


Sales in Exch Exch
Invoice Date USD Rate Due Date Rate Exche rate of future At 3%
30-04-2008 245619 40.0277 15-05-2008 42.400 42.413
31-05-2008 287305 42.1255 15-06-2008 42.9 42.9429
30-06-2008 322251 42.82 15-07-2008 43.17 43.21317
31-07-2008 322155 42.8365 15-08-2008 43.23 43.27323
31-08-2008 245469 42.9389 15-09-2008 45.94 45.98594
30-09-2008 299578 45.564 15-10-2008 48.43 48.47843
31-10-2008 209077 48.6422 15-11-2008 48.99 49.03899
30-11-2008 251003 49.0033 15-12-2008 47.94 47.98794
31-12-2008 280184 48.6419 15-01-2009 49.08 49.12908
31-01-2009 324299 48.8345 15-02-2009 48.72 48.76872
28-02-2009 224429 49.2222 15-03-2009 51.58 51.63158
31-03-2009 300939 51.2315 15-04-2009 49.88 49.92988
30-04-2009 226303 50.0618 15-05-2009 49.55 49.59955
31-05-2009 254369 48.534 15-06-2009 47.94 47.98794
30-06-2009 170805 47.7736 15-07-2009 48.72 48.76872
31-07-2009 192555 48.4765 15-08-2009 48.68 48.72868
31-08-2009 137556 48.337 15-09-2009 48.57 48.61857
30-09-2009 152118 48.4389 15-10-2009 45.91 45.95591
31-10-2009 141348 46.721 15-11-2009 46.09 46.13609

30-11-2009 174159 46.569 15-12-2009 46.64 46.68664
31-12-2009 138496 46.63 15-01-2010 45.67 45.71567
31-01-2010 141788 45.963 15-02-2010 46.38 46.42638
28-02-2010 158673 46.3257 15-03-2010 45.58 45.62558
31-03-2010 155564 45.498 15-04-2010 44.38 44.42438

6.2 ANALYSIS
INVOICE DATE: The date at which company send the order to the customer that is in this
project last date of month.
SALES IN EURO: The total amount of sales in Euro
EXCHANGE RATE: The rate at which one currency can be transferred to another currency
that means exchange rate
RECEIVABLE: The amount of sales done on credit bases at that time bill of receivable
generated it means customer having liability to pay amount which is for the period of 15
days in this project or company
Formula: sales in euro * exchange rate
DUE DATE: The amount of receivable will going to receive actually at that day called due
date for the company
ACTUAL EXCHANGE RATE: The amount of receivable receive at exchange rate of due
date that called actual exchange rate
Formula: actual exchange rate * sales in euro
DIFFERENCE IN RUPEES WITH OUT HEDGING: Due to fluctuation the amount of

receives will differ because of exchange rate of due date so that difference called difference
in rupees without hedging.
Formula: receivable – actual
DIFFERENCE FROM HEDGING : we had hedged our position for the amount of
receivable so how much we will receive actually at due date with hedging that difference.
Formula: amount of future rate – amount of spot rate
PERCENTAGE DIFFERENCE IN WITHOUT HEDGING: The amount of difference in

receivable in terms of percentage:
Formula: amount of fluctuation * 100/ receivable of spot

PERCENTAGE DIFFERENCE IN WITH HEGDGING: The amount of difference in

receivable in terms of percentage
Formula: amount of hedging * 100/ receivable of future
ASSUMPTION OF FUTURE PRICEAT 10 PERCENT: The rate of fluctuation in both the

market I assumed form the actual study of data so I had taken different stages which is given
below, here I also include brokerage charges and as well as other taxes.
[NOTE: - The excel sheet is attached here in Annexure Please Check this excel sheet of
detail analysis]

Chapter – 7
FINDINGS

7.1 FINDINGS
 Finding in two years sale Export data of ( EURO & USD sale data) at Austin
Engineering co ltd which are as under in tabular form and also mentioned in
theoretical framework
 FINDINF OF EURO SALES DATA which are mention as under in table
Withou
t without
RECEIVABL hedgin Hedgin hedgin hedgin ASSU
EURO E ACTUAL g g g% g% M%
-
TOTA 2961278702 - - 0.0984
L 581926366.2 4 717487 571809 2.622 7 10 %
-
TOTA 2961278702 - - 0.0971
L 581926366.2 4 717487 564619 2.622 6 7%
-
TOTA 2961278702 - - 0.0962
L 581926366.2 4 717487 559826 2.622 9 5%
-
TOTA 2961278702 - - 0.0954
L 581926366.2 4 717487 555033 2.622 2 3%
As per the data shown in the above table where company having lots of amount of
business in euro so due to exchange rate fluctuation huge amount of loss created but
if company go for the hedging of euro then it comes to minor loss at different level.
Like if there is fluctuation around 10% then percentage of difference comes 0.098
while without hedging it is 2.622,
Now if there is fluctuation around 7% then percentage of difference comes to 0.097

while without hedging it is same as above,
And at the rate of 5% and 3% it is around 0.096 and 0.095 respectively but the
percentage amount without hedging is remain same because that is the average of
two years data.
Hence, clearly visible in the table that company should go for the hedging because it
reduce the exchange rate volatility and that comes to minor difference to actual
received amount of sales.
RECEIVABL Without Hedgin without ASSU

USD E ACTUAL hedging g hedging % hedging % M%
TOTA 251220087. 1792282.78 2.21266666

L 249427804.5 3 6 243208 7 0.09724162 10 %
TOTA 251220087. 1792282.78 2.21266666
L 249427804.5 3 6 103818 7 0.05425813 7%
TOTA 251220087. 1792282.78 2.21266666 0.09504037
L 249427804.5 3 6 238014 7 7 5%
TOTA 251220087. 1792282.78 2.21266666 0.09415987

L 249427804.5 3 6 235937 7 9 3%
FINDINF OF USD SALES DATA which are mention as under in table
As per the data shown in the above table where company having lots of amount of
business in USD so due to exchange rate fluctuation huge amount of loss created but
if company go for the hedging of euro then it comes to minor loss at different level.
Like if there is fluctuation around 10% then percentage of difference comes 0.097
while without hedging it is 2.21.
Now if there is fluctuation around 7% then percentage of difference comes to 0.054

while without hedging it is same as above.
And at the rate of 5% and 3% it is around 0.095 and 0.094 respectively but the
percentage amount without hedging is remain same because that is the average of
two years data.
Hence, clearly visible in the table that company should go for the hedging because it
reduce the exchange rate volatility and that comes to minor difference to actual
received amount of sales.

Chapter – 8
SUGGESTIONS/RECOMMENDATIONS

8. SUGGESTION
 Company having huge business in euro and us dollar and this kind of currency is
very volatile so just to avoid exchange rate fluctuation company should go for the
hedging in both the currency due to that it will reduce fluctuation till negligible
extend.
 That helps to its working capital need and it shown financial sound company which
is very healthy sign for the company.
 If company wants to go for the currency hedging then there is some formality like
they has to open on corporate dematerialised account and trading account through
company can put trade in to foreign exchange.
 Management of the Company also has to work out on development of Option

Trading Strategies for hedging by using Call & Put Option as it is expected that
trading in currency options will start very soon in near future.

Bibliography
www.aec.eng.com
www.rbi.com
www.nseindia.com
Annexure
EXCEL SHEET OF DETAIL ANALYSIS

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Foreign Exchange risk Management

“Foreign exchange risk management for export”

AUSTIN ENGINEERING CO. LTD

In the partial fulfilment of the award of the MBA Degree

Under the Guidance of

Faculty Guide Company Guide

1 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

2 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

Certificate from school

3 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

The work has not been submitted previously to any other

4 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

5 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

I would also like to thank my company guide of “AUSTIN ENGINEERING

I get chance to recognized my gratitude to director “PROF. B.S.PATEL” of “THE

6 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

The topic of my project is ““Foreign exchange risk management for export”.

7 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

TOTAL 581926366.2 29612787024 -717487 -555033 2.622 0.09542 3%

8 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

Chap. No. PARTICULAR Page No.

9 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

10 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

1.1 SELECTION OF TOPIC

11 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

12 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

1.2 DEFINITION AND BACKGROUND INFORMATION

International business is a term used to collectively describe all commercial transactions

 Advantages of International Business

 Enhance your domestic competitiveness

13 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 Reduce dependence on existing markets

 Disadvantages of International Business

 You may need to wait for long-term gains

 FOREIGN EXCHANGE MARKET IN INDIA

To buy foreign goods or services, or to invest in other countries, companies and

14 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

Because foreign-exchange transactions in India are so tightly controlled, Indian authorities

15 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 DEFINITION OF FORGEIN MARKET

16 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

An instrument, to be settled at a future date, whose value is derived from change in

18 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 Speculation: Bullish, buy futures

19 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 Speculation: Bearish, sell futures

Q.1: What is Currency Hedging?

Q.2: How does Currency Hedging Work?

For example, if an American-based investor wants to invest in an Australian company, using

Q.3: Main Benefits of Currency Hedging

21 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 DEFINITION OF CURRENCY FUTURES

In other words, it is a contract to exchange one currency for another currency at a

 HOW FIRMS USE CURRENCY FUTURES

 Purchasing futures to Hedge Payables:-

22 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

 Selling Futures to Hedge Payables

 Closing out a futures position

23 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

24 The School of Management, Sumandeep Vidyapeeth University, Piparya, Vadodara

1.3 IDENTIFYING THE VARIABLES AND PARAMETERS FOR THE

PARTICULAR STUDY. ESTABLISH THE THEORETICAL

Theoretical Relationship Among variables