A Study into the Competitiveness of The Indian Printing Industry

Under Strategic Management and Business Policy

BITS ZG629T: Dissertation

by N. KRISHNASWAMY

Id No.: 2007HZ79592

Dissertation work carried out at Bharatiya Reserve Bank Note Mudran (P) Ltd.,

Note Mudran Nagar, Salboni- 721132

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE PILANI (RAJASTHAN)

October 2009

II

A Study into the Competitiveness of The Indian Printing Industry

Under Strategic Management and Business Policy

BITS ZG629T: Dissertation

by N. KRISHNASWAMY

Id No.: 2007HZ79592

Dissertation work carried out at Bharatiya Reserve Bank Note Mudran (P) Ltd.,

Note Mudran Nagar, Salboni- 721132

Submitted in partial fulfillment of M.S. Manufacturing Management degree programme

Under the Supervision of Shri. S. Sivananda Reddy, Manager,

Bharatiya Reserve Bank Note Mudran (P) Ltd., Salboni- 721132

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE PILANI (RAJASTHAN)

October 2009

III

CERTIFICATE

This is to certify that the Dissertation entitled A Study into the

Competitiveness of the Indian Printing Industry and submitted by N.

Krishnaswamy, having ID-No. 2007hz79592 for the partial fulfillment of

the requirements of M.S. Manufacturing Management degree of BITS,

embodies the bonafide work done by him under my supervision.

Signature of the Supervisor Place: Salboni Date: October 15, 2009 S. Sivananda Reddy, Manager, Bharatiya Reserve Bank Note Mudran (P) Ltd., Salboni 721132, West Bengal

IV

ABSTRACT

Printing is a mature industry. It is the Indias twelfth largest manufacturing industry in terms of output and a major contributor to the Indian economy. The industry in India has moved from the traditional ink on paper industry to embrace ever-increasing range of technologies and fields of expertise.

Printing related industries in India comprise of some 3007 printing factories and 106993 unregistered printing presses. These printing factories with greater than 200 employees employ about 112974 people. Overwhelming majority of firms are small and medium enterprises employing some 493007 people.

The industry has changed greatly over the last decade. Workflows are becoming fully digital rather than impression based printing. These changes mean that the industry needs less unskilled labour. The industry faces powerful buyers and suppliers. Labour productivity rose considerably in the past few years.

This study will describe the current market, employment, technology and other characteristics of the industry and assess performance over the past decade, provide foresight about potential tr4ends in markets, technologies and other variables and discuss the strengths and weaknesses and provide conclusions. This will strive to formulate intended actions for the industry under the following chapters.

1. Introduction

This will explain the coverage of the sector studied and sources and nature of data.

2. Industry Characteristics

This will study the demand for print, technologies available, industry suppliers, industry organizations, industry structure, the labour market and industrial relations, management, finance and environment

3. Performance

The performance of the industry will be assessed under the headings of output, foreign trade, costs, profitability, capital investment, productivity and obstacles.

4. Foresight

This chapter will cover print markets, technical trends, other trends and scenarios.

5. SWOT analysis

Fourth chapter will study the industry strengths, weaknesses, opportunities, threats and e-business

6. Conclusions

While many consider printing as an industry, which is doomed to decline, this report will find out truthfulness of the perception.

7. Recommendations

This will identify how the industry should achieve the key aims for relevance and success.

Key words : Technical keywords of the Project

Capital investment Opportunities Costs Other trends Demand for print Output E-business Performance of the industry Environment Print markets Finance Productivity Foreign trade Profitability Industrial relations Scenarios Industry Characteristics Strengths Industry organizations SWOT analysis industry structure Technical trends Industry suppliers Technologies Labour market Threats Management Weaknesses Obstacles

V

ACKNOWLEDGMENT

I take this opportunity to express my deep sense of thanks to my mentor Shri. S.

Sivananda Reddy, Manager, Bharatiya Reserve Bank Note Mudran (P) Limited, Midnapore West

District, Salboni - 721132 for accepting me as his student. His guidance and immense

encouragement throughout the tenure of the course and preparation of this dissertation is highly

acknowleged. I am thankful to Shri. Biswanath Chakraborty, Deputy General Manager, Bharatiya

Reserve Bank Note Mudran (P) Limited, Salboni 721132 for extending all the possible help in

bringing out this dissertation and extending support all through this course.

I acknowledge thankfully the cooperation received from the teaching and non-teaching

staff of Birla Institute of Technology, Pilani during the course of this study.

I thank Captain. S. Madhav Rao, General Manager, Shri. Avinash Chandra Jolly, Deputy

General Manager and Manas Ranjan Mohanty, Deputy General Manager, Bharatiya Reserve

Bank Note Mudran Private Limited, Salboni for all the encouragement I received from them in

this work.

I acknowledge the permission given to pursue this course and study reimbursement

given by the Bharatiya Reserve Bank Note Mudran Private Limited, Salboni and its management

gratefully.

I express my sincere thanks to the All India Federation of Master Printers and Madras

Printers and Lithographers Association and their office bearers and the administrative staff for

helping me with the needful information and data.

I am thankful to all my friends and colleagues in BRBNMPL, printing fraternity, well

wishers and friends from the Printing Industry for giving the required information for this

dissertation.

I am overwhelmed with sincere feelings of indebtedness to all the members of my family

particularly Amma, Appa, Jayashree and Medha Vanaja who all enabled me achieve what I

wanted. I owe this dissertation to them.

N. Krishnaswamy

VI

CONTENTS

Executive summary 3

Introduction

Coverage of the sector

Industry statistics 10

Structure of the report

1 Industry characteristics 12

1.1 Demand 12

1.2 Technology 13

1.3 Industry suppliers 16

1.4 Industry organizations 16

1.5 Industry structure 17

1.6 The labour market and industrial relations 18

1.7 Management 22

1.8 Finance 23

1.9 Environment 23

2 Performance 24

2.1 Output 24

2.2 Foreign trade 24

2.3 Costs 25

2.4 Profitability 26

2.5 Capital investment 27

2.6 Productivity 27

2.7 Obstacles to achieving business goals 29

3 Foresight 30

3.1 Print markets 30

3.2 Technical trends 33

3.3 Other trends 36

3.4 Scenarios 36

VII

4 SWOT analysis 39

4.1 Strengths 39

4.2 Weaknesses 40

4.3 Opportunities 44

4.4 Threats 45

4.5 E-business 47

5 Conclusions 48

6 Intended actions 50

Appendix 1 Steering Group membership 54

Appendix 2 Tables 55

Footnotes 64

VIII

LIST OF FIGURES

Figure

Number

Title of the Figure Page

Introduction

Coverage of the sector

Industry statistics 10

Structure of the report

1 Industry characteristics 12

1.1 Demand 12

1.2 Technology 13

1.3 Industry suppliers 16

1.4 Industry organizations 16

1.5 Industry structure 17

1.6 The labour market and industrial relations 18

1.7 Management 22

1.8 Finance 23

1.9 Environment 23

IX

LIST OF TABLES

Table

Number

Title of the able Page

Number

Introduction

Coverage of the sector

Industry statistics 10

Structure of the report

1 Industry characteristics 12

1.1 Demand 12

1.2 Technology 13

1.3 Industry suppliers 16

1.4 Industry organizations 16

1.5 Industry structure 17

1.6 The labour market and industrial relations 18

1.7 Management 22

1.8 Finance 23

1.9 Environment 23

1

INTRODUCTION

2

INTRODUCTION

This study on the printing industry in India aims to inform policy-makers and others about the

printing industrys current position and future development and to recommend actions to improve

its competitiveness. A good number of individuals in all sections of the industry and its

customers were consulted and/or were asked to comment on issues discussed to ensure that the

publication is representative of a wide range of opinion.

Coverage of the sector

As the following pages demonstrate, printing is a complex industry. It has many discrete

segments, which use unique technologies and have a distinctive customer base. The heart of the

industry is the activities classified under Division 22 of National Informatics Centre 2004

classification using data from Central Statistical organization (CSO). This Three Digit NIC 22

series includes Publishing, Printing and Reproduction of Recorded media. This has major

subdivisions namely printing and publishing of books, printing and publishing newspapers,

printing and publishing of periodicals, printing of banknotes, service activities relate to printing,

reproduction and publishing of recorded media. In this paper, the definition of the industry used

to describe what the industry has been and is now, is that of traditional boundaries based on

product and process.

The sub-category of printing can be further divided into:

Industrial printing of products such as magazines, catalogues, weekly newspapers and

newspaper supplements. These are usually in colour and are produced in large volume, generally

on web-fed gravure or litho presses, in plants and by companies, which are much larger than the

industry norm (and if in a trade association, are typically members of the All India Federation of

Master Printers).

General printing of other products which are generally printed in low-medium volumes on

sheet-fed litho presses, although some printers in this category are starting to acquire digital

printers (and again are also represented by the All India Federation of Master Printers).

Quick printing of short runs, usually with very fast turnarounds, usually done on copiers in

high street premises.

3

The specialist area of screen printing, whose companies are represented by the Screen Printing

Association of India.

To add to the complexity, most industrial and general printing companies, and a few

screen printers and quick printers, also have in-house facilities to undertake some of the tasks

which fall under the NIC headings of bookbinding and finishing, composition and plate

making, and other activities related to printing. Printing also occurs in the packaging industry,

either in the form of:

Labels to attach to glass, metal, rigid plastic and other containers.

Direct printing onto sheets of carton-board, paper, plastics and composite materials (such as the

layered paper/metal/plastic material used for liquid packaging), which are subsequently converted

into the final package (usually on the users production line).

Printed packaging can be further subdivided into:

Corrugated packaging layers of straight cardboard reinforced by a middle layer of corrugated

board, typically converted into cardboard boxes for shipping goods in. Because the product is

bulky and relatively low value it is usually printed as part of an integrated production process at a

board manufacturing plant. Producers therefore tend to be larger than in other segments and are

usually members of the Corrugated Packaging Association.

Folding cartons smaller cardboard or composite containers used to package individual items,

which typically use higher quality print on higher quality materials than corrugated. The sector

has companies of all sizes and is represented by the Indian Carton Association (a section of the

AIFMP).

Flexible packaging sealed plastic bags and other non-rigid containers. The sector has

distinctive raw materials, conversion processes and customers.

Sheet fed packaging a residual category of independent, non-integrated companies who

convert cardboard and paper into what are generally low-value products such as cardboard and

rigid boxes and paper sacks. The sector is represented by the Indian Printing Packaging and

Allied Machinery Manufacturers Association, an umbrella body for several smaller trade

associations. These almost go unrepresented at national level, but each town or city has its own

group of printers forming a small trade association.

4

Industry statistics

Understanding competitiveness requires accurate statistics. Despite some amendments in

response to industry requests, there is a widespread feeling that Indian government data about the

industry remains incomplete because of:

The large number of small companies in the industry, some of whom are not registered for

VAT and others of whom may be wrongly classified in tax returns.

Inappropriate definitions of industry segments.

The integration of printing with other business activities for example, provision of printing as

part of an overall facilities management contract or in-house printing by commercial and

educational bodies which creates inconsistency in how they are classified by companies making

returns.

The market and production data collected by industry associations and consultancies tends

to be more accurate, because it is collected in a less impersonal way and is often subject to

verification. But it is often gathered from members and collaborators, and so may be

unrepresentative and is usually based on organisation-specific definitions and therefore not

comparable. The difficulty of making an all Indian comparisons is further exacerbate by the

differences in

The data, which is required and is actually provided from very small companies (which

dominate the printing industry).

The level of black activities, which are not accounted for in tax or regulatory returns.

There are even fewer reliable statistics available for printed packaging than is the case

with printing. As a result the report has been unable to conduct as detailed an analysis. Data has

been used wherever it is available and areas where printed packaging differs from printing have

been noted in the text.

It is important that the statistical and information deficiencies with regard to printed

packaging are filled as the sector is of considerable economic importance. Given that it also has

distinctive suppliers and technologies (for example, increasing use of flexo-presses rather than

gravure or litho), concentrated customers primarily large retailers and fast moving consumer

goods (FMCG) manufacturers for carton and flexible packaging and has been particularly badly

hit by the strength of sterling, it should be the subject of an independent competitiveness report.

5

More generally, these statistical problems not only make it difficult to assess the true

competitiveness of Indian printing but, also harm the industry. Poor data distorts perceptions of

its scale and performance and makes it difficult for financial stakeholders to make well-informed

investment decisions. In the interim, the best available statistics has been used to support the

analysis but those from non-official sources need to be interpreted with caution.

Structure of the report

The study broadly follows the following format:

Section 1 describes the current market, employment, technology and other characteristics of the

sector.

Section 2 assesses its performance over the last decade, particularly vis--vis other sectors in the

India.

Section 3 provides foresight about potential trends in markets, technologies and other variables.

Section 4 discusses the strengths and weaknesses, which have been identified during the

consultation process.

Section 5 provides conclusions.

Section 6 formulates intended actions for the industry.

6

ONE

INDUSTRY CHARACTERISTICS

7

1 INDUSTRY CHARACTERISTICS

Indias printing industry is at the crossroads. The pace of technological change in the industry is

nothing short of phenomenal. Long gone are the images of plastic sleeved printers stooped over

typesetting cases. The industry in India has moved from the traditional ink on paper industry to

embrace an ever-increasing range of technologies and fields of expertise.

Printing is one of the largest manufacturing industries in the India. It comprises of some

3007 printing factories and 1,06,993 unregistered printing presses. These printing factories

(greater than 200 employees) employ 1,12,974 people. The overwhelming majority of firms are

small and medium enterprises employing some 4,93,007 people. The industry plays an important

role in regional India. Approximately 35% of graphic arts establishments are located outside

capital cities.

Table 1.1 Comparison of Performance of NIC 22 with GDP and Manufacturing Industry

Year GDP Manufacturing NIC 22

Rs. Crore Year on Year %

Rs. In lakhs Year on Year %

Rs. In lakhs

Year on Year %

AS % of GDP

1999-00 1792292 6.10 89793835 14.57 239584 0.1337

2000-01 1870387 4.36 92690185 3.23 228041 -4.82 0.1219

2001-02 1978055 6.00 96245663 3.84 216821 -4.92 0.1096

2002-03 2052586 4.00 113056111 17.47 274459 26.58 0.1337

2003-04 2226041 8.00 128740055 13.87 300878 9.63 0.1352

Source: Annual Survey of Industries, Reserve Bank of India Annual Report 2004-05 The turnover of printing and publishing industry cluster is Rs. 3,00,878 lakhs representing

1.352% of GDP. There is also a significant presence of small printers in the district and taluk

levels. Overall the printing and printed packaging industries:

Are a vital supplier to publishing, one of Indias most successful industries

8

Purchase most of the output of the Indian paper and board and ink industries

Are a major purchaser of computer hardware, peripherals and software

Are a leading user of high bandwidth telecommunications

Provide a substantial market for specialty chemicals and coatings.

The printing and publishing industry has outperformed the general manufacturing industry index

all through the nineties and first five years of this century.

Table 1.2:

Index of industrial production

Year General Index % Year on Year

Printing, Paper & paper products

% Year on Year Base Year

1981-82 109.3 - 108.3 - 1980-81 =100) 1990-91 212.6 94.5 198.0 82.8

1994-95 108.4 - 108.6 -

1993-94 =100)

1995-96 122.3 12.8 125.5 15.6 1996-97 130.8 7.0 136.9 9.1 1997-98 139.5 6.7 146.4 6.9 1998-99 145.2 4.1 169.8 16.0 1999-00 154.9 6.7 180.5 6.3 2000-01 162.6 5.0 164.0 9.1 2001-02 167.0 2.7 169.0 3.0 2003-03 176.6 5.7 180.5 6.8 2003-04 189.0 7.0 208.7 15.6

Source: Annual Survey of Industries 2003-04, Central Statistical Organisation

Printing and Publishing industry stands at eighth position for the period between 1980-81

to 1990-91 at 198.0 whereas the General Index stands at 212.6 and percentage of change from the

base is 82.8 and 94.5 respectively. The Indian printing industry has outperformed the general

manufacturing industry index all through the nineties. This performance in the nineties though

fluctuating is due to several factors, one of which is easy access to cheap international raw

materials due to liberalization. The growth during the previous decade has fluctuated from 3.0 to

16.0 and except for 1999-00, where the year on year index was less than the General Index; it was

growing at 22% more than the General index. The industry has grown exceptionally well during

1998 -99 and 2003-04 at more than double than the General Index at by 290% and 193%

respectively. The growth has come down to 3% due to General industry slow down in 2001-02.

Performance for the year 2000-01 which has seen a negative growth rate of -21 % in volume for

the paper and paperboard industry.

9

Table 1.3:

Principal Characteristics by Industry Group for Publishing, Printing and Related Activities

(Value figures in Rs. Lakh, Others in Number)

2002-03 2003-04

NIC-22 All % NIC-22 All %

Factories 3046 127957 2.38 3007 129074 2.33

Fixed Capital 383132 44475938 0.86 402260 47333140 0.85

Productive Capital 574753 54488048 1.05 573092 59256189 0.97

Invested Capital 489965 63747308 0.77 531049 67959786 0.78

Workers 76954 6161493 1.25 70634 6086908 1.16

Total Persons Engaged 120592 7935948 1.52 112974 7870081 1.44

Wages to Workers 45130 2968905 1.52 44291 3047777 1.45

Total Emoluments 114255 5515801 2.07 115299 5833675 1.98

Total input 740894 91618549 0.81 752581 103962329 0.72

Gross Output 106544 4203558 2.53 1104433 128740055 0.86

Depreciation 50094 4203558 1.19 50975 4482349 1.14

Net Value Added 274459 17234002 1.59 300878 20295377 1.48

Rent Paid 10769 379355 2.84 10332 416084 2.48

Interest Paid 28054 3835182 0.73 30591 3397229 0.90

Rank 18 18 Source: Annual Survey of Industries 2003-04

The industry comprises of about 3,007 factories, which is 2.33 % of the total number of factories

in India in 2003-04. It employs 70,634 workers or 1.16 % of total workforce. It engages 1,12,974

people, which is 1.44% of the total persons engaged in industrial activities. With Rs. 4,02,260

lakhs of invested capital this industry accounts 0.85% of the total capital invested. This industry

pays 1.98% of the total emoluments paid by the industry. While it accounts for 0.76% of the total

industrial inputs, it accounts for the 0.86% of total industrial output giving a higher value

10

addition. Its Net Value Addition is Rs. 3,00,878 lakhs which is 1.48% of the total Net Value

Addition ranking 18 in a list of 26 industries.

Table 1.4:

Principal Characteristics by Industry Group for Publishing, Printing and Related Activities

(Value figures in Rs. Lakh, Others in Number)

2002-03 2003-04

22 All % 22 All %

Factories 3046 127957 2.38 3007 129074 2.33

Fixed Capital 383132 44475938 0.86 402260 47333140 0.85

Productive Capital 574753 54488048 1.05 573092 59256189 0.97

Invested Capital 489965 63747308 0.77 531049 67959786 0.78

Workers 76954 6161493 1.25 70634 6086908 1.16

Total Persons Engaged 120592 7935948 1.52 112974 7870081 1.44

Wages to Workers 45130 2968905 1.52 44291 3047777 1.45

Total Emoluments 114255 5515801 2.07 115299 5833675 1.98

Total input 740894 91618549 0.81 752581 103962329 0.72

Gross Output 106544 4203558 2.53 1104433 128740055 0.86

Depreciation 50094 4203558 1.19 50975 4482349 1.14

Net Value Added 274459 17234002 1.59 300878 20295377 1.48

Rent Paid 10769 379355 2.84 10332 416084 2.48

Interest Paid 28054 3835182 0.73 30591 3397229 0.90

Rank 18 18

Source: Annual Survey of Industries 2003-04

The industry comprises of about 3,007 factories, which is 2.33 % of the total number of

factories in India in 2003-04. It employs 70,634 workers or 1.16 % of total workforce. It engages

1,12,974 people, which is 1.44% of the total persons engaged in industrial activities. With Rs.

4,02,260 lakhs of invested capital this industry accounts 0.85% of the total capital invested. This

11

industry pays 1.98 of the total emoluments paid by the industry. While it accounts for 0.76% of

the total industrial inputs, it accounts for the 0.86% of total industrial output giving a higher value

addition. Its Net Value Addition is 3,00,878, which is 1.48% of the total Net Value Addition

ranking 18 in a list of 26 industries.

1.1 Demand

Even in an electronic age, printed media have many distinctive and highly valued properties.

Print has a long historical tradition, which continues through widely accepted principles of

graphic design, typography and other parameters to influence perceptions of how information is

best communicated. It has a physicality that is lacking in electronic media and which, in the eyes

of many people, makes it more appealing. It also has an emotional association with many of lifes

pleasures as when people curl up with a good book, eagerly await the next issue of a magazine,

or leaf through a brochure or catalogue when making a spending decision. And, through its link

with literacy, print is the foundation of a civilised society. More prosaically, print continues to

have a great psychological impact on buyers and other users, especially when it makes use of

high quality colour and innovative substrates. Printed documents are also portable, in a way

which electronic equivalents have not yet achieved, and do not require complex technologies and

the existence of a power supply to read them. Indeed, with careful storage, they can be more

permanent than electronic files which are prone to corruption and whose format can quickly

become obsolete.

The primary purpose of packaging is to contain, store and easily transport goods.

However, most packaging has print on it either printed directly onto the packaging substrate or

onto a label because there is a need to convey information about the contents and, for consumer

and some other kinds of packaging, to persuade people to buy it. The paper/board packaging

market which is almost entirely directly printed, rose from 41% in 1996 to 46% of the total

packaging market during the previous decade.

Some generic trends, which are occurring in almost, all markets for print and printed

packaging are:

Concentration and therefore increased buying power in customer industries, such as

publishing or retailing.

12

Closer integration of supply chains to improve customer response and reduce inventory. This

requires printers especially those producing printed packaging to co-ordinate more closely

with buyers and/or customers.

Less use of professional print buyers (who usually had some experience in the printing

industry) and greater integration of print with other procurement activities.

Demands for price reduction, due to cost pressures in customer industries and the high visibility

of printing as an overhead item.

Demands for faster turnaround times in order to meet the needs of customers own rapidly

changing markets, and because of the general time urgency of modern culture.

Demands for higher performance from printed products, through high quality colour, new

substrates, personalisation or other means.

Shorter runs, resulting from reduced stockpiling, tailoring of outputs to specific individuals or

groups of customers and other drivers.

The trend towards shorter runs is particularly significant because it increases the

throughput of print jobs. This requires printers to be much quicker at preparing presses for new

work, and to be more efficient at production management and administration. Print is a means to

an end, that of communicating information. This is also an important function of packaging. The

actual cost of a printed item typically forms only 5-10% of the total cost of achieving this

communication. The costs of preparing the material to be printed, of holding stock and disposing

of that which is waste (for example, 30-40% of books and magazines produced are unsold and

returned for pulping), and of administering the entire chain are much greater. Printers have

considerable opportunities to develop new services to capture more of the value added (or

destroyed) within the process, and many are doing so. Customers are receptive to this because:

They may wish to outsource non-core activities, such as running in-house printing activities or

storing printing material for distribution on request.

They want complete solutions to their needs rather than simply a product leading direct mail

printers, for example, often collate and mail customer packs and maintain customer databases.

Printers may have technical expertise in non-printing areas, for example, image archiving and

retrieval or database development and management.

1.2 Technology

13

Historically, printing has been a very distinctive craft-based manufacturing industry, whose

technologies make it qualitatively different from other sectors. Although it is now moving

towards computer integrated manufacturing in some respects, it remains an unusually complex

production process. Printing presses operate to very fine tolerances which require either very high

levels of skill or advanced automatic control. Reproducing complex graphic designs can also be

difficult, especially when customers may not appreciate some of the difficulties of doing so. And,

whilst modern colour management software and instruments can ensure objective consistency of

outputs and inputs (which has many benefits), colour perception is subjective so that customers

and staff will not always accept that this is the case. Printing therefore requires a great deal of

checking (through printing proofs of work in progress) and communication across the supply

chain. This chain has four main stages:

Content creation usually done by customers such as advertising agencies, editorial

departments etc. but printers may be involved in specialised areas or for inexperienced customers.

Pre-press processing the component elements of the final job (primarily images and text) so

that they suitable for outputting and then assembling them into a composite version for

outputting.

Outputs creation and finishing of printed or electronic products for distribution.

Distribution delivery of products to final customers.

The falling cost of pre-press equipment and its increasing automation which is expected

to continue has allowed many medium-sized printers to establish pre-press departments, with

adverse effects on the repro houses who have specialised in this area. This increases the skill

requirements of smaller printers and means that repro houses must diversify into other areas, such

as digital asset management or specialist digital printing.

Fundamental change has been occurring in all of these four areas, driven by a move from

analogue to digital processes. Most content is now created on computers and transferred and

processed as electronic files. It only takes physical form when it is imaged onto a plate or screen

for impression-based printing (which transfers an inked image onto paper or other substrates

through physical pressure). New digital technologies (which transfer the image by non-contact

processes such as electrostatic attraction or inkjets) even eradicate the need to make plates or

screens. Digital printing creates completely new possibilities for print such as:

14

Fully-personalised brochures and information packs, containing a selection of material of direct

interest to the recipient.

The end of out of print books as it becomes economic to print in small batches or even single

copies.

Individual or small versions of products such as greeting cards, labels and carton packaging.

Frequent reprinting and therefore opportunities to amend small quantities of promotional

materials, business cards etc., rather than having to place a substantial single order.

Digital printing only accounts for a minor share of output at present. Impression-based

technologies are likely to remain the dominant technology for the foreseeable future, and may

grow in absolute usage even while their relative share declines. In the very long-term, however,

digital printing is expected to become as or more important than impression-based methods. The

move to digital workflows is independent of these changes in output technologies and has

numerous consequences, notably:

Rapid technological obsolescence of pre-press and other equipment, with a consequent need to

depreciate it over much shorter periods (typically three years) than the industry has been used to.

Continuous expenditure on software upgrading.

Making file errors and problems a major source of cost, which can only be eliminated by

detailed checking, IT expertise and customer education.

A need for better process understanding and management amongst staff, as mistakes in early

stages can be hidden until output, when they are very expensive to correct.

High investment in networks and data storage in order to move data around quickly and archive

it until required.

A need for colour management and other software to ensure that all items of equipment are

calibrated to each other.

Closer electronic integration of processes within printers, and between them and other players

in the supply chain, so that inputs can be transferred and work can be sent backwards and

forwards for proofing.

A reduction in environmental impacts because it avoids the need for film processing chemicals

and wastes.

Some other important technical trends within the industry are:

15

Faster make ready times and/or running speeds of presses, which means that the capacity of a

new machine is much greater sometimes double that of older ones of similar size.

Increased automation of press functions such as ink settings and plate changing.

Increased costs and substitution of inputs due to environmental regulations on the emissions of

volatile organic compounds (VOCs) which arise from inks, and also the alcohol solutions and

solvents which are used to treat and clean printing presses.

Use of higher performance substrates which can achieve better results e.g. better colour

reproduction, higher gloss and/or reduce their weight and thereby reduce costs.

A growing emphasis on finishing binding, collating and other procedures as a means of

adding value to printed products.

Concentration in suppliers, which are increasingly offering a wider range of equipment and

software on a global scale. This means that it is increasingly hard to gain competitive advantage

from technology alone, as this is available anywhere in the world.

The traditional, and still probably the most widely used, method of distribution is print

and distribute in which finished print is delivered on a van or lorry. The industry is therefore

highly dependent on a good road system; especially as paper is ordered on a just in time basis

and customers are demanding quicker turnarounds of their orders. However, alternative methods

of distribution are growing especially:

Fulfillment services, in which printers stock products such as brochures and mail them to an

individual order (in some cases from customers and in others internal staff).

Distribute and print, which replaces the shipping of printed products to multiple locations

with transmission of an electronic file for local outputting in smaller quantities.

Electronic distribution, in which content is published on electronic media with no assumption

that it will be printed.

One implication of this growing complexity of distribution is that printers have be to be

adept at repurposing files into different formats so that they can be outputted and distributed in

different ways. Modern printing is heavily dependent on information technology (IT) and

becoming more so. The large size of image files means that even a relatively small printer will

often handle more data, and process it more quickly, than a medium sized building society. As a

result printing is a key market for several major IT vendors such as Adobe or Apple. The

corollary is that much of the industrys capital expenditure is devoted to IT hardware and

16

software, and to IT components embedded within other equipment. Much pre-press equipment,

for example, is now essentially specialised computers. Printing is also a major, and growing,

employer of staff with IT skills, particularly in networking and graphics software.

Good telecommunications links are also essential, with even the smallest commercial

printers usually having ISDN connections. The industry is also seeing a growing interest in

Internet usage and of e-commerce. Indeed, printing has had more dot coms albeit mainly US

based than almost any other manufacturing sector. Section 3 discusses the potential impact of e-

business on printing in more detail. One important aspect of this growing reliance on IT and

telecommunications is the extension of the potential market for individual printers. It makes it

easier for local printers to seek regional or national markets, for Indian printers to seek

international markets and for overseas printers to target Indian work. Technical complexity also

results in substantial capital expenditure. It is not unknown, for example, for even a small printer

with Rs. 1-2 crore of turnover to make a single item equipment purchase with a value of Rs.

40,00,000 or more.

1.3 Industry Suppliers

The Indian printing industry is very dependent on external inputs. For high end works 59% of

national paper consumption is provided by imports while it 20% for lower end jobs. Most pre-

press, production printing and finishing equipment is also imported, primarily from Germany and

Japan and graphics software is provided by American suppliers. The only areas of printing inputs

with a substantial Indian production base are inks and coatings and some specialised areas of

web-press equipment. There is a substantial Indian development base for web-press machines,

and some areas of prepress hardware.

There is also increasing consolidation amongst print suppliers, especially with regard to

paper and board. Supplier R&D in India is relatively on a lesser scale than other leading

economies. India does have some research organizations namely Research Institute for Newpaper

Development, IRFA and Print Management Institute by Heidleberg which undertakes primary

and secondary research in printing technologies, especially newspaper printing and publishing

and commercial printing. It also provides technical consultancy, market intelligence, training and

other services to a sub-continental customer base.

17

There is also some R&D conducted in the India by the paper and inks and coating

industry, and in some specialist areas of pre-press equipment and software. Only a small number

of universities notably the Department of Printing Engineering at the Anna University, Chennai

and the Department of Printing, Manipal Institute of Technology are known to specialise in

research on the printing.

1.4 Industry Organisations

The largest Indian trade association is the All India Federation of Master Printers -AIFMP which

has representation of the industry from all the states of India with state level associations of

Master printers in membership. It has major membership bodies from all the metropolitan cities

of India namely, New Delhi, Mumbai, Kolkata, Chennai and Bangalore. There are also major

members from Chandigarh, Sivakasi, Coimbatore and Jalandhar. There are also more specialised

associations Indian Printing Packaging and Allied Machinery Manufacturers Asociation and All

India Screen Printing Association. Printed packaging has independent trade associations,

representing the different market segments.

Two professional associations, the Research Institute for Newspaper Development and the

Indian Institute of Packaging provide personal development support and training for individual

members of their industries.

Both printing and printed packaging do not have any major trade union except for the

ones, which are found in newspapers.

1.5 Industry Structure

Printing in every country is dominated by small-medium sized enterprises, with most printers

serving local markets. Newspaper, magazine and carton and corrugated printers tend to be much

larger than others.

India has an even higher percentage of output produced by small companies and a smaller

average size of firm, than other developed countries. Nonetheless, the industry has been

consolidating. This is most advanced in printed packaging. Printing is less consolidated but

several recent mergers and takeovers means that there are now 100 Indian printers with more than

500 employees. Consolidation has also been driven by the entry to, and growth within the India,

18

of foreign companies. This reflects a general trend towards more internationalisation of printing,

which has traditionally been organised on a national basis. The main reasons for this appear to be:

Providing a global service to multinational customers.

Expanding product opportunities by tailoring them to local markets.

Taking advantage of lower cost production locations.

Todate, the national and specialised nature of most printing markets means that achieving

economies of scale does not appear to be an important driver, but this may change with the

development of a more integrated European market. Foreign investment by Indian printers has

started growing but is on a extremely smaller scale to inward investment. Until recently, this was

focused on printing machine manufacturing namely by Manugraph Industries. There is also more

foreign investment by niche printers, either in autonomous operations, magazines or as in

academic journal printing and related services, outsourcing of some back office operations.

1.6 The Labour Market and Industrial Relations

Indian printing employment has been increasing marginally during the early 2000s. This mirrors

the situation in many developed countries and China but contrasts with the rising levels of GDP

of the country. The main cause of falling printing employment in India is automation of printing

processes, which has reduced the need for semi-skilled and unskilled labour.

Employment in carton packaging has fallen at a similar rate as printing. However, there

had not been considerable job losses during 2000 due to of export markets. One unusual aspect of

Indian printing employment is its relatively even national distribution across the country. It is a

substantial employer in all areas of the India and is one of the most important industries in several

regions Sivakasi, Mumbai and Amritsar, for example, have some of Indias largest concentrations

of web offset printing. Some regions have also increased their printing employment during the

1990s.

The industrys workforce is mainly involved in production, although the percentage of

office-based jobs is rising with time. Around a third of the total jobs in the industry are in

finishing. This also has the highest proportion of women, in part because it is the area with most

part-time work. The number of new entrants to the industry has been relatively low in recent

years. One reason for this is a surplus of older workers. A second is a decline in traditional entry

19

methods such as apprenticeships (which are generally over-subscribed when they are offered). A

third reason is difficulties in recruiting the non-traditional skills such as IT which are increasingly

required by the industry. As a result, the workforce has a high average age 42 in the case of

AIFMP owned press employee members.

The industry has traditionally recruited from people leaving school at the minimum age. It

has been seen as one of the most skilled, well paid and respected occupations for such leavers and

attracted many of the most able candidates. The increase in the numbers of young people staying

on for further and higher education has now reduced this pool. Although the industry has partially

compensated by employing more staff with SSC levels and HSC and a small but growing number

of graduates (especially in larger companies), the change has caused difficulties. There are now

fewer people with the ability and commitment to develop advanced skill levels amongst early

school leavers. Although it remains easy to recruit unskilled staff, there is also greater

competition both for school leavers with SSC level and higher qualifications and for qualified

staff, especially those with the IT and customer service/marketing skills for which the industry

has a growing need.

A 1999 survey found that 40% of responding companies had experienced labour shortages

at the time of the interview and/or during the previous six months. Another study of companies in

the Amritsar area found that vacancies were mainly related to the introduction of new technology

and machinery, changes in production processes and the needs of new clients. The main reason

for the difficulty in filling these was lack of skills or relevant work experience amongst

applicants.

The industry has a number of countrywide or more geographically limited national

agreements for specific segments of printing and printed packaging, which are negotiated

between the AIFMP and the various trade associations. These vary in their degree of coverage of

the segment, and in their terms and conditions. The largest agreement in terms of numbers

covered is that between the AIFMP and trade unions. A number of larger companies individual

agreements. Many peoples perceptions of printing industrial relations is that they are smooth and

cordial and not strike prone. However, the level of disputes has been very low during the 1990s

and is well below the national average.

20

Table 1.5:

Skill Requirements for Modern Printing

Adapted from D. Smallbone, R. Baldock and S. Supri, New Technology and Related Skills Needs

in the Printing and Publishing Industries, London: Centre for Enterprise and Economic

Development Research, Middlesex University, 1999.

1.6.1 Education and training

The lead body for the sectors education and training is the Print and Graphic Communication is

Industrial Training Institutes awarding National Trade Certificates functioning under Ministry of

Size Size Current leading edge Future Future 1-9 employees

Multi-tasking in pre-press: Scanning Typesetting Pagemaking Image setting/platemaking/screenmaking

Convergence of pre-press skills Imagesetting/platemaking/screenmaking Operating computerized conventional litho and direct digital colour presses and screen presses Finishing skills -in-house and increasingly digitized

10-49 employees

Multi-tasking in pre-press: scanning typesetting pagemaking Imagesetting/ platemaking/ CTP/ screenmaking skills Operating computerised conventional litho and direct digital colour presses and screen presses Finishing skills in-house and increasingly digitised Direct to screen projection

Convergence of pre-press skills Operating computerized conventional litho and direct digital colour presses and screen presses Finishing skills (in-house and increasingly digitised) Direct to screen projection Finishing in-house/increasingly digitised Data anagement/archiving Greater knowledge of alternative media Increased customer relations training/advising customers Knowledge of JIT rinting/distribute to print

50 and above employees

Internet/ISDN/Intranet Convergence of pre-press skills Operating computerised conventional litho and direct digital colour presses and screen presses Finishing in-house/increasingly digitised Data management/archiving Knowledge of alternative media Customer relations training /advising customers Press staff with clients Direct to screen projection

Convergence of pre-press skills Operating computerised conventional litho and direct digital colour presses and screen presses Finishing in-house/increasingly digitised Data management/archiving Knowledge of alternative media Dedicated customer service relations Training/advising customers Knowledge of JIT printing/distribute to print Press staff with clients

21

Labour. This awards certificate level vocational training to incumbents producing skilled

workers. State Boards of Technical Education conduct diploma level courses and produce

technologists and technicians to man the supervisory level and highly technical skilled

manpower. Degree level courses are conducted by some seven universities in printing

engineering producing engineers and technocrats to man entry level managers for production,

research and marketing jobs. This is governed by All India Council of Technical Education

AICTE who provides recognition and accredition. It also acts the monitoring and controlling

authority for educational quality and performance. This is funded by the Ministry of Education,

Government of India.

There have been several sub-regional skills initiatives involving collaboration between the

AIFMP and the state level associations. The amount, and nature, of skills required in printing is

changing. The industry has traditionally employed large numbers of skilled and semi-skilled staff

to man printing presses and undertake pre-press activities. Increased press automation and

productivity is reducing the requirement for unskilled and, to some degree, semi-skilled staff.

Those who remain generally require less skill in manual press adjustments and more in computer-

based process control. Shopfloor staffs are also being given greater responsibility for managing

print processes.

The demand for skilled staff in the press, pre-press and finishing areas is more stable and

may even be increasing. However, in pre-press the balance has shifted from manual techniques to

detailed understanding of graphics software, design skills and knowledge of the overall print

process (so that files can be prepared without errors). The rapid pace of technical change also

requires regular retraining with a consequent need for staff with mental flexibility and a good

grounding in the basic principles of print production processes. The following table provides a

detailed breakdown of the new skill requirements for printing, from a study conducted by All

Federation of Master Printers.

Table 1.6:

Qualifications of Staff in Indian Printing Companies

Level of Education Required Percentage

School Certificate 16.90%

Higher Secondary 07.00%

22

National Trade Certificate 41.60%

Diploma 37.00%

Bachelor of Technology 04.00%

Vocational Education 15.00%

Other Qualifications 02.70%

Post Diploma 09.10%

Postgraduate Certificate 02.30%

Postgraduate Diploma 02.30%

Engineering Degree 01.80%

Post Graduate 02.30%

Source: AIFMP, Workforce Survey 2001

One difficulty for all areas of production education and training is the rapid obsolescence of

equipment. Educational bodies find it difficult to fund the costs of regular replacement, especially

when other subject areas may be faster growing and cheaper to provide. Many employers are then

reluctant to devote time and money if staff are not training on the latest equipment. A minority of

colleges have managed to overcome this difficulty by winning support from manufacturers, as

with Anna University, Chennai, Jadavpur University, Kolkata and --------------------Engineering

College, Pune.

The industry also has a growing need for non-production skills such as customer service,

sales and marketing, IT support (e.g. for networks and file transfer) and database preparation and

management. Some of these skills which often cross the border between technical and

management roles are industry specific but many are generic in nature and can be provided by

non-print specific courses, for example, in management. Only a small proportion of industry

staffs have higher-level qualifications such as diploma levels or degrees.

As noted, there has also been a sharp fall in the traditional route into the industry that of

school leavers taking up apprenticeships and/or attending full- or part-time courses in further

education. It has been estimated that only 5000 people take up printing and graphic arts related

courses. These numbers may not be comparing like with like, as Chinese courses tend to be

broadly based with, for example, a large multi-media component so that many people go into

publishing and other industries once qualified. Nonetheless, most experts believe that there is a

substantial difference in the numbers of young people receiving print industry education. As a

23

result of falling recruitment, the number of Indian colleges offering printing courses has remained

at only six which is abysmally a low figure.

The 2001 Workforce Survey of printing workplaces found that only a minority of

companies were undertaking training. Of those which were, machine printers were the category

of staff most likely to be receiving training (in 37% of responding companies) and sales staff the

least likely (in only 17% of respondent companies). Companies which were relatively

sophisticated in terms of IT were more likely to be training staff than others.

Table1.7:

Levels of Training in Printing and Printed Packaging

Level Training percentage

Directors / Managers 22%

Supervisor 24%

Printing administrators 26%

Machine printers 37%

Finishers 26%

Prepress staff 26%

Clerical staff 28%

Transport 18%

Maintenance 25%

Sales 17%

Note: Percentage who have received training in responding companies, which employ this

category of staff

Source: AIFMP, Workforce Survey 2001

Much of the training which was provided was on-the-job. Whilst this is essential and

invaluable in printing, and will always remain important, it has many limitations such as lack of

contact with outside ideas or poor training methods when not supplemented by off-the-job

approaches. The main reason given for companies not training was lack of need. A fifth of

respondents also felt that accredited training made little difference to staff performance.

24

The 2001 Workforce Survey also revealed a patchy take-up of qualification-based training

schemes and related initiatives. It found that only:

38% of sites were employing modern apprentices, national trainees or other young people on a

structured training scheme, with medium-large companies being much more likely to do so than

smaller ones (60% in sites with over 100 staff, and 46% amongst those employing 25-99).

31% of sites were using Diplomas or Degrees, but in these a mean proportion of 10% of staff

were utilising them.

13% of sites were using Investors in People.

However, almost all the sites which were involved in such schemes found them to be useful.

When asked where they would go to get advice on training and staff development, 49%

cited a trade association and only 23% an official business advice or training organization.

Shorter-term technical training in the industry is provided by:

Colleges particularly those which have alliances with manufacturers, as with the IRFA,

Research Institute of Newspaper Development, Heidelberg Print Media Academy.

Suppliers increasingly significant as they are able to offer access to the latest equipment.

Professional bodies notably the Anna University, Jadavpur University and Indian Institute of

Packaging.

Trade associations training is an important activity for all associations and accounts for the

bulk of the expenditure for several. It is delivered both through courses and other means, such as

the interactive CD-ROM based package Sinapse developed by the AIFMP.

The NTC-ITI this has a number of training centres and has played a leading role in several

local skill development initiatives. Its work parallels successful union-employer training

collaborations in Scandinavia.

IRFA International the main consultancy and research centre for the industry.

Private training providers particularly significant for software training.

There are a number of undergraduate courses in graphic design but very few which focus

on printing or printed packaging. This is also the case at postgraduate level. Indian Institute of

Packaging, which is partially targeted at the printing, packaging and printing supply industries.

The Anna University, Chennai, jadavpur University, Kolkata and Guru Jambeshwar Univarsity,

Hissar offer MS in printing and packaging engineering and technology. Many print educators

believe that e-learning can overcome some of the problems of cost, distance and inflexibility

associated with attending college, and provide access for people in remote locations. However,

25

the 2001 Workforce Survey found that printing staff have a preference for more traditional forms

of training.

1.7 Management

The recent consolidation of the industry has created a number of large printing companies, which

approximate to similar sized peers in other industries in their approach to management. In

general, however, printing has always been a very entrepreneurial sector, with most companies

being founded and run by people who have risen within its ranks. Managers and supervisors too

have tended to follow the same route. An informal survey of Indian and American print managers

found that far fewer Indian print managers had received further education and only 18 per cent

had a degree, compared to 46 per cent of the US respondents. This partially reflects the higher

percentage of people undertaking higher education in America. The survey also found that over

40 per cent of Indian managers had worked in the industry for more than 25 years and very few

for less than 10 years. Authors informal survey found little change in the situation, with only

28% of responding directors/managers having higher academic qualifications. No comparable

Chinese statistics are available.

Entrepreneurialism and movement up the ranks remains an important, and in many

respects positive, aspect of printing management. Industry-specific opportunities for development

are also provided by management and supervisory courses offered by trade associations, as well

as the AIFMP. This organises events, company visits and other activities to assist the

development of potential and junior managers. There are also some local initiatives in each region

by regional bodies in association with state agencies such as Micro, Small and Medium Industries

Service Institute. This identified leadership development for team leaders as a priority

requirement for companies.

There has been little management-level recruitment into the industry until recently. This is

now increasing in larger companies, and for specialist posts such as finance, IT and marketing

where there is a shortage of expertise within the sector. There is also a small but potentially

significant trend of individuals with external management experience taking full control, or

equity stakes, in printing companies which they then manage.

26

This lack of qualifications may explain the industrys relative disinterest in business

planning. A 2001 Workforce Survey found that only 63% of respondents had formal business

plan and under half of companies with less than 10 employees and less than half had any kind

of human resources plan. The previous 2000 Work force Survey also found that only 52% of sites

surveyed were operating to recognised or customer-devised management standards. Of the sites

where standards were in use 72% operated to the ISO 9000 series and 13% to Investors in People.

Larger sites were more likely to operate to quality standards than smaller ones (80% of

companies with over 100 employees were doing so compared to 40% of those with under 10

employees). Probably a majority of commercial printers have a computerised management

information system (MIS) to track jobs and provide decision support information such as time

spent and actions performed. However, many of these are relatively old and, in the view of

suppliers and consultants, few are being used to their full potential.

1.8 Finance

Some 95% of printers have debt which, on average, finances 33% of their assets.1 5 46% of the

2000 printers who filed accounts increased their debt during the year 2000. About 15% of those

increasing debt were making losses, suggesting that they were in serious financial difficulty.

Although no statistics are available, it is likely that, as with Indian industry generally,

Indian printers rely more on short-term overdrafts than continental equivalents, which make

greater use of longer-term bank loans. There has also been a trend from purchasing printing

presses to using asset-based finance such as leasing or secured loans. The traditional longevity

and correspondingly high resale value of printing presses has meant that lenders have lower risks

than in some other areas of asset-based financing and so lend on relatively generous terms. Some

believe that the ready availability of asset-based finance has contributed to the industrys over-

capacity. However, the situation has changed in recent years because of a fall in the value of

second-hand presses.

Very few printing companies are quoted on the Bombay Stock Exchange or National

Stock Exchange and those which are have low price/earnings ratios. The main reason for this is a

perception that they are in a low growth sector. This makes them vulnerable to takeover. Low

valuations and perceived insecurity often mean that private companies are reluctant to consider

27

listing and are therefore unattractive for commercial equity providers which require this as an

exit strategy. Low valuations also mean that few such providers take an interest in the sector.

1.9 Environment

The main environmental impacts of printing are:

Consumption of resources in the form of paper, cardboard and plastic substrates, energy, water

and consumables such as inks.

Disposal of paper wasted in production or surplus to requirements, which often amount to 5-

10% of the volume purchased for printing and up to 20% for carton packaging.

Emissions of volatile organic compounds (VOCs) from solvent-based inks, cleaning fluids and

other consumables.

Waste water resulting from processing film and cleaning machines.

Printed products are also a major component of national waste streams. This includes

products which are wasted within the supply chain as with the 30-40% of printed books and

magazines which are pulped and those which are disposed of by customers.

These impacts mean that the industry is directly subject to an increasing amount of

environmental regulations, notably:

The Packaging Waste Regulations which make all printers of more than 50 tons per annum

output responsible for recovering a proportion of their output at the end of its life.

The Levies by State Pollution Control Boards.

Emissions controls on volatile organic compounds (VOCs) which are driving a move to water-

based inks.

Printing and printed packaging are also indirectly affected by environmental regulations

on the paper industry, especially those encouraging greater use of recovered fibre and on

downstream customers. Finally, there are voluntary or semi-voluntary (i.e. undertaken to avoid

regulation) initiatives to reduce wastage within supply chains by industry customers such as

direct mail users and magazine and newspaper publishers.

28

As yet very few printers have adopted ISO 14001, the standard for environmental

management systems. The main reason appears to be a concern that the standard is bureaucratic

and expensive to implement and therefore beyond the reach of smaller printers.

29

TWO

LITERATURE REVIEW

30

2 LITERATURE REVIEW

In this chapter an attempt is made to present the literature pertaining to the research work relate to

the present study. Since, not much work has been one on the printing industry in India, this study

is undertaken. Studies conducted on the printing and allied industries in general and Indian

printing industry in particular, have been reviewed under the following sections.

2.1 Printing industry in Indian manufacturing

2.2 Industry economics

2.3 Customer, technology and future

2.1 Printing Industry in Indian Manufacturing

Indian printing industry has formed part of the study on manufacturing industry since 1951.

However it is considered in combination with paper, paper products and printing as the group had

been classified. In this classification paper manufacturing industry formed the core and paper

products manufacturing and printing industry took the shape of associate industry. This

classification is used to collect data with regard to production and utilization of paper for forming

part of the manufacturing industry statistics. Not much of an organized study had taken place or

books are published on printing industry. However, government had constituted committees

towards setting up of text book presses, which had prepared reports for that purpose.

The industry groupings in the form of associations of clusters had been in existence since

about half a century in different parts of India. These associations had conducted workshops,

meetings and other endeavours like exhibitions, conferences etc., towards protecting the

sustenance of the industry. However all these had focused mainly on the technological

component of the industry. The economical and business components were restricted towards

making occasional representations to government on taxes and duties. Also printers had most of

the time focused themselves as traders who quote, wait for the response and execute, rather than

31

viewing themselves as industrialists. This also has to do with the fact that printing is considered

mainly as need based process for reproduction by any available means than an industrial effort.

However, newspaper industry a segment of the printing industry has always been ahead in

organizing itself for their protection and benefits. Still, there had not been an organized study

done in this area. Since the printing industry is divided into various segments catering to a

principal industries or as in house printing units specializing in an obscure product almost no

systematic study has so for not been initiated for the industry as whole. However, certain states

where printing industry has its major clusters in India had conducted studies focusing on solving

a particular problem or studied this industry as an associate of other major industry.

There are books on printing industry in India, focusing mainly on historical aspects of the

industry and its development or not so many books on printing as technology. It is a matter for

concern that only a few numbers of text on printing technology catering to the lower end of the

trade.

The printing Industry was classified alongwith Paper and paper products industry in 1962

Standard Industrial Classification, wit a revision in 1968. In 1970 it was made into a three digit

classification printing still clubbed with paper industry. The National Industrial Classification

1987 grouped Publishing, Printing and Related activities. The 1998 classification made printing

as a separate entity in the Industrial Classification. This had further been classified in 2004 fully

covering all the old and new printing and related activities.

As for the reasons explained above studies on printing industry as an economic activity is

not available. Also the first scientific study on this industry had been done in 1985 by Hira Kant

Jha, under the title Empirical study of printing presses in Patna, Bihar, as dissertation for his Ph.

D. in Patna University, 1985). There was another study in Punjab focusing on the employment

and wages of the printing press employees of Amritsar in 1955. However none of the above

known studies had approached the printing industry economics as a whole or as its major

component parts, so as to use for reference or review. Also the author could not come across any

other scientific study on this subject topic.

2.2 Industry Economics

32

Australian Printing Industry Report, 1998, has studied the printing Industry of Australia in 1998

and published a comprehensive report covering all areas of the industry from raw material,

business processes to future prospects and foreign competition. It also had outlined the industry

specific initiatives by the government.

Encyclopaedia of American Industry, Standard & Poors NetAdvantage (2002), gives a crisp

outlook of the American Publishing industry in the form of overview.

Naresh Khanna (2002) in his article in India Printer and Publisher writes about the globalization

of printing technology.

The Occupational Outlook Handbook 2002-03, published by the Graphic Communications

Council, USA, explains in detail the employment and different occupations available in the

industry.

Ramu Ramanathans, (2003) article titled An Overview of the Small Offset sector, published in

the Indian Printer & Publisher has provided details on the small offset sector of the printing

industry in India.

The United States Census Bureaus Economic Census Series Reports 2002 gives statistical

analysis of different segments of it printing industry.

A Unique Printing Industry Resource Printing Industries Association of Australia, 2005 details

the Australias fourth largest manufacturing industry employer and a major contributor to the its

economy - its printing industry its current status. It also outlines an ambitious plan for its future

sustenance, growth and globalisation.

An Overview of the Printing and Publishing Industry in the US, Including Future Predictions to

2009, (2005) explains in detail the state of printing industry in United States in all its details. It

also makes forecast of its future to ensure its dominance in creative printing and leader of print

production innovation.

33

Colin Thompson (2006) in his article titled The Chinese Printing Industry explains about the

dynamics of the emerging Chinese Printing Industry and its effect on the global printing industry.

The KBA Report (2006), published by Koening & Baur AG, (2006) Germany and Polygraph

International Quarterly, Germany have detailed their current status of technology and operational

outputs.

In addition reports generated by Indian Pulp and Paper Technical Association, National

Association of Printers & Lithographers, USA, North American Graphic Arts Suppliers

Association, Paperboard Packaging Council, USA, Printing Industries of America, Screen

printing & Graphic Imaging Association International, USA, Technical Association of the

Graphic Arts, USA, The All India Printing Ink Manufacturers Association, Waterless Printing

Association, USA, on different topics on the printing industry economics and technology and

forecast for the future sourced as published literature and made available online in the world wide

web have been reviewed in preparing this dissertation.

2.3 Customer, Technology and Future

Birkenshaw, John, (1992) in his lecture published in Ink & Print, 1993 issue talks about the

Future trends in printing, which explain in detail the convergence of information technology,

knowledge management and printing industry in providing customer a new composite service.

Printing for Profit 2000 published by the British Printing Industries Federation in 1990s had

outlined the future prospects for the industry in United Kingdom.

Colin Thompson (2006) in his articles titled Graphical Challenges for the Printing Industry

outlines what the future has in store for the printing industry in United Kingdom by taking the

worldview.

Colin Thompson (2006) in his three part article titled Challenges for the Printing Industry makes

an in depth study of the future of the printing industry and makes his forecasts.

34

CHAPTER THREE

PERFORMANCE

35

3 PERFORMANCE

The performance of the printing and printed packaging sectors can be assessed against three

criteria:

Its potential performance (if that can be ascertained).

The performance of other comparable Indian industries.

The performance of other national printing industries.

Although the information needed to make these comparisons is patchy, the following sections

consider recent trends in turnover, foreign trade, prices and costs, profitability, investment,

capacity utilisation and productivity.

3.1 Output

Printing is a mature industry. Indeed, the sector is seen as the archetypal bellweather sector

which tracks and to some degree anticipates changes in macro economic trends. Value added

in printing (code 222) has historically grown broadly in line with GDP, although being

disproportionately hit by recession and recovering strongly afterwards. The value of printed

output is closely linked with advertising expenditure which directly or indirectly funds around

50-60% of printed material but that the link is weakening as prints relative share falls. This has

declined from 52% of total spend in 1990 to 47% in 2000.

Other areas have been less buoyant with value added in carton packaging having fallen

annually since 1995. Consumption of the printing industrys main raw material writing papers,

most of which are printed on rose by 26% between 1993 and 1999, or double the rate of

printing industry turnover. This occurred despite a reduction in the weight of papers used for

most print jobs. Much of this increase is attributable to increased desktop printing in offices and

homes but it also reflects declining prices for many printed outputs.

Within these generic categories there are several segments whose sales have been growing

by at least 10% per annum over much of the last decade, notably:

Direct mail products and related services such as mailing to customers.

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Self-adhesive labels (although recently hit by the high valuation of sterling).

Specialised labels, packaging and leaflets for pharmaceuticals and personal care products

(which has also grown less quickly in the late 1990s).

Conversely, some segments have been in absolute decline, including:

Areas of carton packaging which have been displaced by other materials and/or overseas

suppliers.

Some specialised business forms which have been superceded by electronic documents.

Colour book printing which has largely moved to overseas suppliers.

3.2 Foreign Trade

Printing and services related to printing makes a positive contribution to the balance of payments

in India and exports have been steadily increasing and imports also increasing in recent years.

Several large printers estimate that they have been facing stiff competition from the increase in

movement of value added printed products from China during the late 1990s.

Table below shows the composition of exports and exports. The areas with the most

positive trade balance are books and brochures (the main category of both imports and exports)

and newspapers and periodicals. Two notable segments with a negative trade balance are folding

cartons and catalogues, which have been especially badly hit by sterling strength.

Table 3.1:

Composition of Indias Printing and Services to Printing Trade

1 Cartons, boxes etc

2 Registers, notebooks etc

3 Diaries

4 Exercise books

5 Manufactured forms

6 Albums

7 Printed labels

8 Stationery not specified elsewhere

9 Single sheets

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10 Dictionaries and encyclopedias

11 Books, booklets and brochures

12 Newspapers and periodicals

13 Childrens books

14 Music

15 Maps and charts

16 Transfers

17 Postcards and greeting cards

18 Calendars

19 Trade advertising

20 Playing cards

21 Security printing

22 Other

Source: AIFMP Report 2004

3.3 Costs

Printers costs have risen more quickly than the both the price indices in most years over the last

decade. Printing and printed packaging has three main cost categories:

Paper, board and other substrates

Labour

Depreciation on equipment.

Other significant cost categories are:

Purchased services (e.g. pre-press for smaller printers)

Inks, solvents, plates and other consumables

Energy

Transport.

3.3.1 Paper and other substrates

Paper typically accounts for around 30% of the costs of a printed document. Board can be an

even higher percentage of packaging. Paper and board production is a highly cyclical industry,

which moves from periods of substantial over-supply and downward price movements to

acute shortages, with the opposite effect. Price fluctuations are further increased for many

customers because wood pulp is priced in dollars.

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There is volatility in the prices of paper and paper products. Although prices in 1999 were

similar and in some cases below those of 1992 there was a major price hike in 1994-95. The

softer prices of the late 1990s have been related to over-capacity. A combination of reduced

investment, consolidation and managed temporary closures of mills has now reduced this and

there was a marked rise in prices in 1999-2000 in the region of 20%.

There is also a feeling in the industry that Indian customers are subjected to extraordinary

price increases, and the last to receive the benefit of price falls. Much pulp is produced from

integrated mills making both this and paper. The paper is usually priced in local currencies and is

sometimes sold relatively cheaply because pulp is the main output. Rising oil prices have also led

to increases in the price of plastics, with consequent margin pressures on flexible packaging

companies.

3.3.2 Labour

Average earnings in printing have risen by slightly more than the national average over the

decade from 1990-99. However, they have slightly lagged the national average between 1995 and

1999. A study of average earnings in AIFMP member companies and demonstrates the

importance of overtime in those earnings. This is an important difference between the India and

China, where overtime levels tend to be much lower and working hours higher. This situation is

not expected to change in the coming years. In general, Indian print earnings are thought to be in

higher than China but much lower than developed countries. However, higher social security

costs in compared to China mean that employers total labour costs per individual are higher in

India.

Print earnings differ between regions, different sizes of company and different

occupations. Origination has been the best paid occupation within the industry and finishing the

least although experts believe that this situation has changed over the years. No data is available

for average management earnings in general but enquiries by the author indicate both average

salaries for particular posts and, inter alia, the wide variety of posts which are to be found in

contemporary printing.

Table 3.2:

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Earnings Differential (Compared to National Average)

Product sector Differential

General printing 1.00

Origination 1.18

Book printing and binding 0.94

Periodicals 1.09

Newspapers 1.19

Business forms 0.81

Manufactured stationery 0.73

Security 1.00

Digital printing 1.01

Cartons 1.04

Flexible packaging 1.23

Labels 0.92

Trade finishing 0.86

Source: AIFMP Manpower Survey 2001

3.3.4 Energy

Although energy prices are only a small proportion of total print costs, they are a variable cost,

which can have a significant impact on margins. The main energy source for printing is

electricity, whose price tends to be higher than in many competitor countries. The industrys

dependence on road transport also means that it is adversely influenced by the high cost of diesel

fuel in India.

The energy-intensity of paper and board making energy costs are around 10% of

turnover in India also means that energy prices have a significant influence on paper and board

prices. The competitiveness study of the paper industry has demonstrated that the industry faces

higher costs for electricity than China.

3.4 Profitability

The industry faces powerful buyers and suppliers, has a product, which can often be easily

substituted, and has intense competition between printers, which is exacerbated by over capacity.

Hence, there has been continuous downward pressure on prices. For example, when gravure

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printers lose business they will target large-format web offset markets. The losers in that battle

then go for medium-format work and so on. In this way the effect spreads out to the entire

industry.

Price and cost pressures mean that average printing profitability is low, and declining. The

median return on capital employed for respondents to the AIFMPs business survey fell from

14.67% in 1999 to 8.63% in 2000, with a considerable variation between individual sectors. This

compares with a net rate of return for Indian manufacturing as a whole. As printing has elements

of both manufacturing and services, this suggests that it is relatively unprofitable. This is

especially true when the abnormally high level of risk created by a constant need for large, lumpy

investments even in relatively small printers is considered.

Table 3.3

Printing Industry Profitability (Percentage Return on Capital Employed)

1999 2000

India Printing Median 14.67 8.63

General printing 16.07 12.61

Book production 9.88 12.84

Periodicals and newspapers 17.00 19.63

Cartons and flexible packaging 12.45 11.65

Manufactured stationery / Business forms 14.45 8.74

Labels 12.77 9.63

Origination 22.70 8.87

Trade finishing 23.37 10.60

Source: AIFMP Productivity Survey 2001

Packaging has been particularly badly hit. In carton packaging, for example, return on

sales fell from 6.0% in 1995 to only 2.8% in 1999. A study by AIFMP examined the 1997-2000

report and accounts of 1181 printers and divided them into four roughly equal categories of:

Winners which have low borrowings as a percentage of sales, and relatively high margins and

sales growth

Chancers which have high sales growth but also high borrowings and average margins

Sleepers which have low borrowings but average margins and negative sales growth

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Losers which have high borrowings, negative sales growth and are barely profitable.AIFMP

study concludes that time is running out for losers, which are almost a quarter of all the

companies examined.

3.5 Capital Investment

Despite falling margins and flat profitability, the industry has continued to invest in new

technology throughout the 1990s (although anecdotal evidence suggests that there may now be a

delayed response). Investment was around 6.5% of turnover in the mid 1990s, which was around

the global average. One reason for this relatively high investment is the speed of technical and

mark