Strategic Analysis of TATA STEEL
THE TEAM – Section B | GROUP 7
Krishna Sil
UM15088
Preeti Patnaik
UM15097
Trisha Anand
UM15120
Varanasi Arjun
UM15121
Yasasvi Santosh K
UM15123
Submitted To:
Prof. Brajaraj Mohanty
1
Contents
1
Executive Summary............................................................................................................................................................................................ 5
2
Industry Overview ............................................................................................................................................................................................... 6
3
2.1
Nature and Size of the Industry ................................................................................................................................................................. 6
2.2
Key Growth drivers for the Industry ........................................................................................................................................................... 8
2.3
Identification of Critical Success Factors (CSF) ...................................................................................................................................... 8
2.4
Industry Benchmarks................................................................................................................................................................................... 9
2.5
Import and Export Scenario in Indian Steel sector ............................................................................................................................... 14
2.6
PESTEL Analysis ........................................................................................................................................................................................... 14
2.7
Porter’s Five Forces Analysis..................................................................................................................................................................... 18
2.8
Strategic Group Mapping ....................................................................................................................................................................... 23
2.9
Competitive Landscape.......................................................................................................................................................................... 24
2.10
Market Segmentation .............................................................................................................................................................................. 25
2.11
Buying Criteria Analysis of the Industry................................................................................................................................................... 26
2.12
Key trends and future developments .................................................................................................................................................... 28
2.13
Highlights Of Union Budget 2016 – Impact On Steel Sector ............................................................................................................... 29
Company Overview ........................................................................................................................................................................................ 30
2
4
3.1
Company background............................................................................................................................................................................ 30
3.2
Timeline with key milestones and their strategic impact .................................................................................................................... 31
3.3
Vision, Mission, Goals, and Strategic Themes ....................................................................................................................................... 33
3.4
Key Product and Service Portfolio .......................................................................................................................................................... 35
3.5
Core Competencies of the firm.............................................................................................................................................................. 38
3.6
Business Model of the organization ........................................................................................................................................................ 39
3.7
3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map) ................................ 41
3.8
SWOT Analysis ............................................................................................................................................................................................ 43
3.9
Competitor Analysis (identify competitors) ........................................................................................................................................... 44
3.9.1
Based on Critical Success factors ................................................................................................................................................... 44
3.9.2
Based on Financial indicators .......................................................................................................................................................... 45
Future Growth Strategy for the organization................................................................................................................................................ 45
4.1
Portfolio Analysis ........................................................................................................................................................................................ 45
4.1.1
Based on BCG Matrix ........................................................................................................................................................................ 45
4.2
Company’s Strategic Roadmap for future ........................................................................................................................................... 47
4.3
Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE .......................... 50
4.3.1
Reimagining Business Processes ...................................................................................................................................................... 50
4.3.2
Reimagining Customer Segments ................................................................................................................................................... 50
4.3.3
Reimagining Products & Services .................................................................................................................................................... 51
3
4.3.4
Reimagining Workplaces................................................................................................................................................................. 51
4.3.5
Reimagining Channels...................................................................................................................................................................... 51
4
1 Executive Summary
Past few years have been demotivating for the domestic steel industry in India. While the target set for 2030 is 300MT,
industry is facing major capacity underutilization. This is expected to be a consequence of the business cycle that the steel
industry is prone to. In addition to this, the dumping of steel by foreign players in domestic ground is also adding to our
woes.
According to the Steel Ministry's Joint Plant Committee (JPC), production of crude steel during April - December 2015 has
been stagnant, growing at 0.9% compared to the same period last year, to 67 mt. The industry has also been facing a
surge in imports which grew by nearly 30%.
Tata Steel has been performing rather well given the market conditions. The fact that they can charge a premium on a
few branded products, gives them a huge benefit while compared to other players. Consistent performance has led to
shareholders’ faith. They are expected to grow in the encouraging future market demand scenario.
The Union Budget 2016 has shown huge promise with inclusion of domestic steel sector in campaigns like Make in India
and Smart cities. Major steel stocks like Tata Steel, SAIL and JSW Steel gained with the finance minister Arun Jaitley
announcing higher investment on infrastructure. While Tata Steel was up 1.99%, Steel Authority of India Ltd (SAIL) gained
2.16% and JSW Steel jumped 1.54% on the BSE.
As the business cycles and anti-dumping measures by Govt. fall in place, the industry is expected to grow. All major
players have been planning on capacity enhancement and opening of new plants. The Union budget also has shown
steps of encouragement to the sector. This is bound to increase the share prices and hence the market caps of the steel
firms. As the industry will become highly competitive, players will have to be on toes to be in the market.
5
2 Industry Overview
2.1 Nature and Size of the Industry
History and Evolution of the industry
The steel industry is the foundation industry of any economy especially in developing
countries whose material intensity is likely to increase significantly in the future for
infrastructure investment and growth in the manufacturing sector. Steel is crucial to the
development of any modern economy and is considered to be the backbone of human
civilization. The level of per capita consumption of steel is treated as an important index of
the level of socioeconomic development and living standards of the people in any
country. Tata Steel was established by Indian Parsi businessman Jamshetji Nusserwanji Tata
in 1907 (he died in 1904, before the project was completed). Steel was the first core sector
that was freed from License Regime (1990-91) and pricing and distribution controls. The
Indian steel industry began expanding into Europe in the 21st century. In January 2007
India's Tata Steel made a successful $11.3 billion offer to buy European steel maker Corus
Group. New Industrial Policy adopted by the Government has opened the Steel sector for
private investment and exempted it from compulsory licensing. Import of foreign
technology, FDI and other initiatives have given impetus to the private participation. A
number of new/green-field steel plants have come up using modern, state of the art
technologies.
Key Consumers of this industry and their
changing needs
Steel industry works on a Business-to-Business mode of operation. Being a vital input in most
industries steel has a huge consumption across sectors. Some of the key end consumer of
steel are sectors such as Construction, Automotive, Machines & Engineering equipments,
Aerospace, Railways, Energy, Consumer Goods etc.
Steel industry does see some fluctuation in demand with the turn of events in the global
economy. The crisis of 2007-08 resulted in a fall in Construction activity which resulted in a
decline in steel consumption. However, the per capita consumption of total finished steel in
India has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15. India's steel consumption for
6
FY 2015-16 is estimated to increase by 7 per cent, higher than 2 per cent growth last year,
due to improving economic activity, as per E&Y's 'Global Steel 2015-16' report
Stage in the Industry Life cycle
The Steel Industry highly depends on the business cycles. The demand is directly
dependent upon how the global economy is performing- recession or boom in critical
which effects expenditure in areas like construction, automobiles etc. By and large the
steel industry as a whole is a mature industry, individual companies within it might be in the
growth phase. Global player continue to vie for a greater share of an otherwise stagnant
market. Also with steel being a critical raw material, the industry will always remain on the
higher end of the S-Curve in the maturity phase. As steel sector has been suffering from
over capacity and slow demand rise, there is a need to innovate and be more proactive
than reactive. This might involve usage of new technology for lower cost and viable
substitutes which might shift the position of the industry on the S Curve towards the TakeOff Stage. The outlook for steel industry is on the brighter side with demand being spurred
by the emerging economies and there is scope for the industry to perform better.
Total Available Market Size (National and
Global)
India’s crude steel capacity reached 109.85 Million Tonnes (MT) out of which Tata Steel
produced 26.20 million tonnes in 2014-15 and an overall growth of 7.4 per cent. Production
of crude steel grew by 8.9 per cent to 88. 98 MT. Total finished steel production for sale
increased by 5.1 per cent to 92.16 MT. Consumption of total finished steel increased 3.9 per
cent to 76.99 MT. India produced 7.34 MT of steel in the month of September 2015, which
was nearly equal to the country's steel production in September 2014. All major steel
producers had a marginal surplus barring the US which showed a deficit of 16 million
tonnes.
Total Serviceable Market Size (National
and Global)
In 2014, the world crude steel production reached 1665 million tonnes (mt) and showed a
growth of 1% over 2013. China remained the world’s largest crude steel producer in 2014
(823 mt) followed by Japan (110.7 mt), the USA (88.2 mt) and India (86.5 mt) at the 4 th
position. WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3% in
2016 as compared to global steel use growth of 0.5% and 1.4% respectively. Chinese steel
7
use is projected to decline in both these years by 0.5%.
2.2 Key Growth drivers for the Industry
Key Growth drivers
Rationale
Infrastructure spending
India lacks basic infrastructure amenities. The government has announced its intent
to improve this. A lot of key projects, like high-speed railways linking major cities, highway
construction, and housing for all citizens, have been planned by the new government.
Rising disposable incomes
The current GDP per capita (PPP) in India is only $5,350. This is more than 70% of China’s.
India has been on a rising trajectory. Rising income increases the demand for automobiles
and other appliances. This in turn increases demand for steel.
Urbanization
Rising incomes and better job opportunities mean people are moving to cities. This is
leading to demand for housing, which increases steel consumption.
2.3 Identification of Critical Success Factors (CSF)
Critical Success Factor identified
Rationale
CSF 1 Economic and Financial Factors
Higher Annual Net Income After Taxes(ANIAT) over Cost of Capital, High dividend and
Capital Appreciation, Cost-cutting efforts, Domestic market growth, Expanding capacity,
"Pricing Power" with large buyers, Threat from nearby competitors.
CSF 2 Customer Relationships
Efficient csrs and strong company image
Quality products at a reasonable price
CSF 3 Knowledge and Learning
Enhanced competencies in the formulation and implementation of CSR
Integration of cost consciousness in organisational culture and processes
8
CSF 4 Internal Process
Reduced Cash Operating costs, Liability for retired workers, Suitable location to procure
raw materials, a good number of Alliances, mergers, acquisitions and jvs, Product quality,
Skilled and productive workforce and Efficient leveraging of maximum value/benefit of
CSR and its cost
2.4 Industry Benchmarks
Size of industry:
Category
Industry Level
(National)
Activity Ratios
Indicator
Market Leader
Industry Average of Top 5 Firms or players
serving 75-80% of the market
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till Q3)
114894
119792
135990
76,315.18
81,121.19
87,274.77
92,874.14
Size as % of
GDP
1.69
1.8
2
.406
.432
.46
.49
Inventory
turnover
5.73
6.72
7.89
5.31
5.76
5.7
5.74
Receivables
turnover
10.56
9.01
8.11
5.31
5.76
5.7
5.74
Payables
turnover
4.87
6.83
8.76
8.95
9.33
9.91
9.52
Asset
turnover
0.73
0.81
0.82
1.42
1.42
1.44
1.28
Market Size
9
Category
Liquidity Ratios
Solvency Ratios
Profitability Ratios
Indicator
Market Leader
Industry Average of Top 5 Firms or players
serving 75-80% of the market
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till Q3)
Current ratio
0.71
0.6
0.3
1.13
0.99
0.86
1.01
Quick ratio
0.34
0.23
0.20
0.74
0.69
0.65
.62
Cash ratio
NA
NA
NA
NA
NA
NA
NA
Debt-toassets ratio
0.33
0.35
0.33
0.31047
0.31942
0.29936
0.28221
Debt-tocapital ratio
0.47
0.49
0.48
1.23
1.68
1.74
2.28
Debt-toequity ratio
0.43
0.58
0.61
1.23
1.68
1.74
2.28
Interest
coverage
ratio
8.69
5.36
4.38
NA
NA
NA
NA
Gross profit
margin
0.06
0.06
0.1
5.94
5.00
7.11
4.72
Operating
profit margin
0.09
0.02
0.005
9.34
9.14
11.04
8.98
Net profit
margin
10.51
7.54
7.53
4.05
-5.23
2.41
-2.81
Return on
3.487
3.92
3.487
438.79
351.85
417.33
322.79
10
Category
Indicator
Market Leader
Industry Average of Top 5 Firms or players
serving 75-80% of the market
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till Q3)
Return on
equity (ROE)
17.58
12.22
1.957
86.37
167.68
88.86
53.37
Price to
Earnings (P/E)
11.1
12.7
13.89
7.85801
10.9047
9.5365
10.3529
PEG Ratio =
(P/E Ratio) /
Projected
Annual
Growth in
Earnings per
Share
NA
NA
NA
NA
NA
NA
NA
Price to Cash
Flow
NA
NA
NA
NA
NA
NA
NA
Price to Book
(P/B)
0.65
0.59
0.95
1.234782
1.615632
1.508638
2.12646
Price to Sales
NA
NA
NA
NA
NA
NA
NA
Dividend
Yield
2.11
3.18
2.76
120
80
100
80
assets (ROA)
Valuation Ratios or
Price Ratios
Valuation Ratios or
Price Ratios
Valuation Ratios or
Price Ratios
11
Category
Competitive Ratios
Indicator
Market Leader
Industry Average of Top 5 Firms or players
serving 75-80% of the market
2011-12
2012-13
2013-14
2011-12
2012-13
2013-14
2014-15 (till Q3)
Dividend
Pay-out Ratio
23.19
37.94
31.06
13.63
-67.68
11.14
46.63
Enterprise
value(market
capitalisation
plus debt
minus cash)/
EBITDA
8.30
10.5
12.31
NA
NA
NA
NA
Staff Turnover
or Industry
Attrition Rate
NA
NA
NA
NA
NA
NA
NA
Staff Cost/
Salary as
percentage
of Sales
0.168
0.190
0.198
NA
NA
NA
NA
Operating
Expenses as
percentage
of Sales
0.85
0.81
0.88
0.66652
0.71932
0.69644
0.7783
Depreciation
as
percentage
3.89%
4.24%
4.73%
0.03393
0.04294
0.04624
0.04781
12
Category
Indicator
Market Leader
Industry Average of Top 5 Firms or players
serving 75-80% of the market
2011-12
2012-13
2013-14
Fixed Assets
to Sales
Revenue
1.060
0.999
0.879
Advertising
as
percentage
of Sales
0
0
0
2011-12
2012-13
2013-14
2014-15 (till Q3)
of Sales
2.24897
0
2.12362
0
2.09237
0
2.22267
0
13
2.5 Import and Export Scenario in Indian Steel sector
Indian steel industry : Imports (in million tonnes)
2010-11
2011-12
2012-13
6.66
6.86
7.93
2013-14
5.45
2014-15
9.32
Indian steel industry : Exports (in million tonnes)
Category
2010-11
2011-12
2012-13
Total Finished Steel (alloy + non alloy)
3.64
4.59
5.37
2013-14
5.98
2014-15
5.59
Category
Total Finished Steel (alloy + non alloy)
2.6 PESTEL Analysis
Category
Political
Description
Key factors for analysis
Rationale

Anti-Dumping duties on cheap
steel import will benefit Tata
Steel

Continuous infrastructural
development bound to decrease
costs

Tie ups with the Govt. on
campaigns like ‘Make In India’
are boosting the visibility and
reach of the Tata Steel brand

With delicensing and decontrolling of
capacity restrictions, Tata Steel has
come a long way and produces 29
mn. tonnes today

High amount of risk by investing
in the countries like Bangladesh,
Iran, and Thailand. E.g.
Bangladesh and Iran projects
are getting delayed due to
political issues

100% FDI allowed in the Steel sector
has given a huge boost to the
industry as a whole

Advance Licensing Scheme allows
duty free import of raw materials for
exports.
Iron and Steel industry has been
included in the list of `high

Price and distribution of steel were
deregulated from January 1992.

14
priority' industries for automatic
approval for foreign equity
investment up to 100%.

The National Steel policy 2005
targets indigenous production
of 110 million tonnes (mt) by
2019-20 against targeted


consumption of 90 mt by 201920.

Economic
Analysts predict
tough 2016 for
the steel
industry
worldwide but
expect India to
remain more
profitable than
its Asian peers.

Slowdown in Chinese economy
may benefit Tata Steel

Steel industry faces cyclical
economic condition because if
consuming industries like
automobiles, appliances face
any downturn steel companies
also may share the losses
The Planning Commission has
approved a total outlay of US$ 9.5
billion for the development and
promotion of the iron and steel
sector.
The scheme for the promotion of
research and development in the iron
and steel sector has been approved
with a budgetary provision of US$ 24.6
million to initiate and implement the
provisions of the scheme.
Apart from this restrictions on the
import and export have been
reduced

Reduction in import and tariff
reduced from the 105%im year 19921993to 30% in the year 1996-1997.

Cost of acquisition for Corus was
beyond financial expectation. Huge
debt on liability side will need to be
reduced

Subprime crisis in US and Europe led
to huge losses in opportunity cost for
Tata steel as the Netherlands, United
Kingdom and Germany are the main
markets for CORUS
15
Social
Technological
Environmental
Tatas have
been known to
be ethical and
socially active.
They have been
pro-employees
and industry
analysts
attribute their
success to the
same

Known for its ethical behavior
and employee-care Tata steel
was awarded the GOLDEN
PEACOCK GLOBAL AWARD

They have responsibly helped in
habitation of slum areas in urban
developing cities.

800 villages in Jharkhand, Orissa
and Chhattisgarh are
benefitted on issues like
healthcare, economic
wellbeing and education. E.g.
Hospital on wheels
Although Tata
Steel is one of
the most
modern steelmakers in India,
they are still
behind the
state-of-art
practices.

Metal Junction, an e-portal to
sell steel online in collaboration
with SAIL, the biggest market for
the purchasing and selling of
the steel in the world.

Tata Steel invests in R&D to reduce
energy consumption in the
production process.

To reduce the emersions of the
co2nin the environment the
Tata steel is on with the
research of the ultra-low

Tata steel is designing a programme
in which Tata steel would be able to
reduce the co2 emersion by 20 %.

A JV with L&T for the protection of the
16
carbon steel.
Legal

Issue of land acquisitions in
Singur, West Bengal

From past 100 years the
company work is not disturbed
because of any kind of the
strikes and internal issues

Tata steel ensures the EHS
(Environmental health and
safety) under which each and
every employee’s activity is
managed by the EHS
framework.
Olive Ridley sea Turtles at Dharma
port

Mines and Minerals (Regulation and
Development and Regulation) Bill,
2010, requires mining companies to
share 26% of its profit with local
inhabitants. Royalties accounted for
3.4 % of Tata Steel's stand-alone
expenses last year. The new charges
could account for nine per cent of
their total expenditure and cost them
5-6 per cent of their operating profits.

Unstable government in Jharkhand
and various tribal protestors are
creating some legal issues for the
Tata steel to set up 12 MTPA green
field plant.
17
2.7 Porter’s Five Forces Analysis
Porter’s Five Forces
Description
Buyer Power
Although, steel
industry’s
products
are
used in the wide
range
of
industry,
the
number
of
suppliers
is
comparatively
low.
The
products
are
more
or
less
standardized
hence the prices
are competitive.
Only few can
claim premium
like TATA Steel
on account of its
brand
image
earned over the
years and as
they
have
branded
products
like
Tiscon
and
Key factors for analysis

Rising no. of substitutes

Switching Costs

Scales of buyer purchases

differentiated products

Competition between buyers

Availability of information

Threat of backward integration

Concentration of buyer power
Rationale
The bargaining power of buyers is high due to
various factors.
First, there is low level of product differentiation
thus low switching cost for buyers. Competition
is basically on price.
Second, there are many manufacturers in the
market thus buyers have many choices.
Third, due to cyclical demand for steel, there
tend to be (sometimes) oversupply and this
gives
additional bargaining power
to
buyers. Bargaining power of suppliers is also
high due to scarcity of raw materials especially
scrap metals whereby suppliers are raising the
price.
18
Shaktee
Supplier Power
Existing Competition
The bargaining
power
of
suppliers is low
for the fully
integrated
steel plants of
Tata
Steel
mostly
have
captive mines
of
key
raw
material
like
iron ore coal.
This takes away
supplier power
to a great deal

Competition in Supplier Industry

substitutes of suppliers' products

Importance of buyer to the
supplier

Switching costs for suppliers'
products

Threat of forward integration by
suppliers
It is medium in
the domestic
steel industry
as demand still
exceeds the

Listed/Large competitors in
ascending order of size
o JSW Steel
o SAIL

The easier it is to switch suppliers, the less
bargaining power they have. Low supplier
switching costs positively affect Steel
Industry. These statements will have a shortterm positive impact on this entity, which
adds to its value. Low Cost of Switching
Suppliers is a difficult qualitative factor to
defend, so competing institutions will have
an easy time overcoming it. Low Cost of
Switching Suppliers will have a long-term
negative impact on this entity, which
subtracts from the entity's value.

The cost of the raw materials tend to
fluctuate greatly and therefore in the long
run, players with captive sources of inputs
will be better insulated against the rising
prices and better equipped to withstand
downturns in the market. Players like Tata
Steel have entered into contractual
agreements with Miners for procurement of
iron ore.
Th The top 4 firm concentration ratio of the
Iron and Steel Industry is 71%.
This implies that there is oligopoly in the
industry as it is dominated my few major
players. Major percentage of market
output is generated by the 4 largest firms in
19
supply. India is
a net importer
of steel.
However, a
threat from
dumping of
cheaper
products from
foreign players
does exist.
Threat to new
entrants
The threat to
new entrants is
moderate. This
depends to a
great extent on
the four policies
mentioned.
These four
policies also
define
o Jindal (Hisar)
o Visa Steel
o Manaksia Steels

the industry. Large no of
unorganized players
Major players are competing among
themselves
Unlisted
o Rashtriya Ispat Nigam
Limited

Capital Requirement

Economies of scale

Government Policy

Product differentiation

Capital Requirement: Steel industry is a
capital intensive business. It is estimated
that to set up 1 mtpa capacity of
integrated steel plant, it requires
between Rs 25 bn to Rs 30 bn
depending upon the location of the
plant and technology used.

Economies of scale: As far as the sector
forces go, scale of operation does
matter. Benefits of economies of scale
are derived in the form of lower costs,
R& D expenses and better bargaining
power while sourcing raw materials. It
may be noted that those steel
companies, which are integrated, have
their own mines for key raw materials
such as iron ore and coal and this
protects them for the potential threat
20
for new entrants to a significant extent.

Government Policy: The government
has a favorable policy for steel
manufacturers. However, there are
certain discrepancies involved in
allocation of iron ore mines and land
acquisitions. Furthermore, the regulatory
clearances and other issues are some of
the major problems for the new
entrants.

Product differentiation: Steel has very
low barriers in terms of product
differentiation as it doesn't fall into the
luxury or specialty goods and thus does
not
have
any substantial
price
difference.
However,
certain
companies like Tata Steel still enjoy a
premium for their products because of
its quality and its brand value created
more than 100 years back. Bargaining
power
of
buyers:
Unlike
the FMCG or retail sectors, the buyers
have a low bargaining power. However,
the government may curb or put a
ceiling on prices if it feels the need to
do so. The steel companies either sell
the steel directly to the user industries or
through their own distribution networks.
21
Some companies also do exports.
Threat to substitutes
Effect of
Complementors
The price of
steel cans is
constrained by
the price of
glass bottles,
aluminium cans,
and plastic
containers.
These containers
are substitutes,
yet they are not
rivals in the
same industries.
Coke
Limestone

Buyers propensity to substitutes

Relative price and performance
of substitutes

Cost of switching to substitutes
It is medium to low. Although usage of
aluminium has been raising continuously in
the automobile and consumer durables
sectors, it still does not pose any significant
threat to steel as the latter cannot be
replaced completely and the cost
differential is also very high.
Strong Demand Growth Driven by
increased Focus on Fuel Diversification
The demand for these two complementary
products are being led in the Asian geography
by India and China. With China’s GDP and
553 limestone mines existed way back in
internal demand declining, India is expected
2011-2012 in India
to have huge gains
22
2.8 Strategic Group Mapping

Name
Market Cap.
Sales
JSW Steel
27,639.71
46,087.32
14300000
Tata Steel
24,965.09
41,785.00
29000000
SAIL
14,828.59
45,710.78
15400000
Jindal (Hisar)
669.28
7,401.44
8000000
Visa Steel
152.35
922.16
465,000
Capacity
Capacity wise, Tata Steel is the largest private player as represented by the size of the bubble
23

Market cap wise, Tata Steel and JSW Steel are quite competitive and lie on the upper end

Sales wise, all 3 i.e. SAIL, Tata Steel and JSW Steel are competitive as per the latest information
2.9 Competitive Landscape


Value propositions ( Low Cost, Differentiation, Niche)
Competitive Strength Assessment (Normal and Weighted)
o NORMAL
MEASURE
Tata
SAIL
JSW
Jindal
Essar
Normal
Steel
Steel
Steel
ratios
RATING RATING RATING RATING
RATING
Long Term Contracts for Raw
9
9
6.5
3
1 31.58%
Materials
Low Production Costs
9
8
7.5
7
6 24.00%
Export Capability
9
7
4
4
2 34.62%
Value added Services
8
8
5
4
2 29.63%
o
WEIGHTED
MEASURE
WEIGHT
Tata Steel
SAIL
JSW
Jindal Steel
Essar Steel
RATING SCORE RATING SCORE RATING SCORE RATING SCORE RATING SCORE
24
Long Term Contracts for Raw
Materials
Low Production Costs
0.50
9
4.5
9
4.5
6.5
3.25
3
1.5
1
0.25
0.25
9
2.25
8
2
7.5
1.875
7
1.75
6
1.5
Export Capability
0.15
9
1.35
7
1.75
4
0.6
4
0.6
2
0.3
Value added Services
0.10
8
0.8
8
4
5
2.5
4
2
2
1
Scores
8.9
12.25
8.225
5.85
3.05
2.10 Market Segmentation
Key Products and/or Services
Flat Products
- Hot Rolled
- Cold Rolled
- Metallic Coated
- Direct Rolled
- Tubes
- Pre-finished Steels
- Packaging Steels
- Electro Plated Steels
- Electrical Steels
- Narrow Strip
Agricultural Implements
Bearings
Processes
Long Products
- Sections
- Special Profiles
- Rail- Wires
- Wire Rod
- Speciality Steels and Bar
- Plates
- Rebars
Construction Products
- Structural Steel
- Floors
- Walls
- Roofs
- Modular
- Building Components
Regions

India

Asia excluding India

Europe

Rest of the world
25
2.11 Buying Criteria Analysis of the Industry
Parameter
Details
End-user Segments
Significance Attached (Low,
Medium, High)
Strength of Steel
It is a measure of the tensile
strength of the steel. The
automobile sector has shown
an increased demand for
HSS(High Strength Steel) and
UHSS (Ultra High Strength Steel)
in the recent years. The prime
reason for using steel in the
body structure of an
automotive is its inherent
capability to absorb impact
energy in a crash situation .
Automobile Sector
Construction Industry
Individual Customers
High
High
Low
26
This, in combination with the
good formability and joining
capability, makes these
materials often a first choice.
Formability
Resistance to corrosion
With HSS, there can be a
tradeoff
between strength and
formability; in other words, the
stronger a steel is, e.g., in
resisting
stretching (tension), the more
difficult it can be to forge into
shapes, particularly the
stylistically and
aerodynamically optimized
shapes needed for new
vehicles. Steel suppliers
are therefore developing
steels with a range of
properties that give engineers
more flexibility
in selecting an ideal grade of
steel for any given application.
The automobile and
construction sectors prefer
different alloys of stainless steel
as it provides them better
resistance to corrosion.
High
Automobile Sector
Automobile Sector
Construction Sector
High
27
Price/Value
The value attached to the
product bought by a customer
by paying a particular price.
Individual Customers
B2B Clients
High
High
On Time Supply
Most of the clients are B2B
customers, have a preplanned schedule. In case
B2B clients
Low
the order is not completed
on time, then it could result
in payment of the large
amount as a penalty.
Therefore, on time supply of
top quality of steel is
needed so the production
isn’t affected.
2.12 Key trends and future developments
Key Trend
Impact on Industry (Low, Medium, High)
Certainty of Impact (Low probability, medium
probability, high probability)
Increased Domestic Competition: The
incumbent and challengers in the sector
have announced 71 MTPA of steel
capacity between 2012 and 2017
Medium. An increase in capacity and
supply needs to be matched with a
growing demand for greater profitability.
Steel firms have been making losses and
Medium Probability. With the government
announcing an increase in public expenditure in
the Union Budget on infrastructure and housing
there would be greater demand for steel.
28
through both Greenfield and Brownfield
projects.
Muted Global Demand for Steel : Global
steel demand to continue to grow at 24% p.a. Recent recession and economy
slowdown impacted steel industry
growth.
operating with negative cash flows.
Increasing Mergers& Acquisitions:
Facing myriad challenges like demand
volatility, over supply, under utilisation of
capacity, steel makers will fight for
survival. Taking cue from takeovers such
as Tata-Corus and Arcelor-Mittal, there is
likely to be an increase in M&A acitivity.
Limited access to capital would also
force some closures and invitation for
mergers.
Medium. Increased M&A would result in
rationalisation of the sector. Cut down of
over production, better capacity
utilisation. Might also result in portfolio
optimisation as steel makers would assess
the assets and tweak as per demand (
sectoral demands).
Medium-High. Steel demand is expected
to flatten in OECD economies and other
heavy weight economies as signs of
recovery are slow. Structural shifts in
China resulting in over capacity can
impact other regional players in Asia
including Indian players resulting in lesser
margins.
However, land acquisitions and regulatory
clearances prove to be hurdle.
Medium Probability. A McKinsey report puts the
CAGR growth of global steel demand at 3.5%
between 2013-20. However the report also states
that the next cycle of growth would come from
the developing economies- Asia, Africa and Latin
America. With a pro reforms government in seat
and rising GDP figures for emerging economies
one can see a gradual peak in demand. India’s
demand to grow at 5-6%p.a.
Low-Medium Probability. With 80% of global steel
industry operating with negative cash flows over
the past 3-4 years, a big merger or acquisition is
less likely especially as demand is muted.
However, aggressive players from emerging
economies might find this a lucrative opportunity
to expand business. This would also provide the
opportunity to increase their asset base and
product diversity.
2.13 Highlights Of Union Budget 2016 – Impact On Steel Sector




Budgetary proposals will help the industry meet its growth target and reach its full potential
However, doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase the input cost for
domestic producers
"The domestic steel industry will continue to play an important role to the Government of India's schemes of 'Make
in India' and 'Smart cities' as it is a key material supplier to the allied industries.
Outlay for the road and rail projects amounting to about Rs 1.8 lakh crore would boost the ailing steel industry by
inducing steel demand,
29


However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18
months.
Long term measures to create a level playing field are required to firewall the domestic steel industry from global
overcapacity and dumping
3 Company Overview
3.1 Company background
Tata Steel Group is one of the top 10 global steel companies with an annual crude steel capacity of over 29 million tonnes per
annum. It was established in 1907 as Asia's 1st integrated private sector steel company. It is now world's second-most
geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries. The Tata
Steel Group, with a turnover of Rupees 1, 48,614 crores in the financial year 2014, has over 80,000 employees across 5 continents
and is a Fortune 500 company. Backed by 100 glorious years of experience in steel making, Tata Steel is the world’s sixth largest
steel company with an existing annual crude steel production capacity of 30 Million Tonnes Per Annum (MTPA).
It was the vision of Jamsetji Nusserwanji Tata that on February 27, 1908, the 1st stake was driven into the soil of Sakchi. His vision
helped Tata Steel overcome several periods of adversity and strive to improve against all odds.
Tata Steel`s Jamshedpur Works has a crude steel production capacity of 6.8 MTPA which is slated to increase to 10 MTPA by 2010.
The Company also has proposed 3 Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with
additional capacity of 23 MTPA and a Greenfield project in Vietnam.
Tata Steel has created a manufacturing and marketing network in Europe, South-East Asia and the pacific–rim countries. Corus,
which manufactured over 20 MTPA of steel in the year 2008, has operations in the United Kingdom, the Netherlands, Germany,
France, Norway and, Belgium.
30
Tata Steel Thailand is the largest producer of long-steel product in Thailand. It has a manufacturing capacity of 1.7 MTPA. Tata Steel
has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces around 2 MTPA of steel products
across its regional operations in 7 countries.
The iron ore mines and collieries in India give the company another advantage in raw material sourcing. Tata Steel is also striving
towards raw materials security through joint ventures in Thailand, Australia, Mozambique, Ivory Coast and, Oman. Tata Steel has
signed an agreement with SAIL (Steel Authority of India Limited) to establish a 50:50 joint venture company for coal mining in India.
Tata Steel has also bought 19.9% stake in New Millennium Capital Corporation (Canada) for iron ore mining.
In Tamil Nadu(India), exploration of opportunities in titanium dioxide business, ferro–chrome plant in South Africa and setting up of a
deep sea port in coastal Odisha (India) are integral to the ‘Growth and Globalization’ objective of Tata Steel.
Tata Steel India is the 1st integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize 2008
for excellence in Total Quality Management.
3.2 Timeline with key milestones and their strategic impact
1907: Tata Iron & Steel Co Ltd was established by Jamsetji Tata. Iron making commenced in Bihar where rich iron ore (deposits)
had been identified in the early 1900s.
1911: Blast Furnace operation at Sakchi begins.
1919: The iron and steelmaking factory in Sakchi and adjacent township was later named Jamshedpur.
1912: At this time, a 12 hour working day was the legal requirement in Britain.
1920: Leave-with-pay introduced. This practice was rare pre-1940s.
1924: TISCO close to closure as a result of 1920s Depression.
31
1971: Government attempt to nationalize TISCO fails.
1987: Collaboration started with Timken in bearings production.
1987: Collaboration with the Timken Co (USA) was in the setup of Tata Timken for the manufacture of industrial bearings.
1996: Tata Ryerson was a joint venture that would provide industrial materials management services in India.
2001: Announces closure of steelmaking in Llanwern, South Wales.
2004: An online trading and procurement platform was launched (website: www.mjunction.com). It is a joint venture of Tata Steel
and SAIL (Steel Authority of India)
2005: TISCO changed its name to Tata Steel.
2007: Expansion in Vietnam by Tata Steel was affected through NatSteel Asia Pte Ltd (Tata's wholly owned Singapore subsidiary).
2007: Bid for Corus commenced in 2006 with a deal signed by Tata Iron & Steel and Corus. Around 1 month after this deal was
signed; Brazil's CSN launched a counter offer to Corus. Within a few weeks, Tata Steel increased their original offer which was
matched within a few hours by a yet higher offer from CSN. Around 6 weeks later, Tata Steel won the bid - albeit at a markedly
higher price than Tata's original offer.
2010: Mothballing of the Teesside plant was regarded as necessary after the consortium involved in the steel off take contract (for
which a 10-year deal was signed in 2005) pulled out of the steel slab purchasing arrangement, soon after the financial and steel
market crisis of summer in 2008. Thailand's SSI later purchased Teesside plant.
2011: Mothballing of Llanwern intended as a temporary measure, with HSM restart [it was subject to steel market demand
conditions] anticipated at the end in 2012.
2013: Tata Steel Europe reports record GBP 1.2 billion losses.
2015: With the decision (August 2015) to close Llanwern hot strip mill, production of HRC was to be centred on Port Talbot.
2015: Mothballing of Tata Steel's Scunthorpe plate mill, closure of the Dawes Lane coke oven complex, closure of steel plants in
Dalzell and Clydebridge in October 2015. Other in October 2015 steel plant closures in the UK included Redcar in Teeside. In
32
October 2015 the UK's Caparo Industries also went into administration. Cheap Chinese steel imports, high energy costs, a strong
pound, and other cost burdens [e.g. excessive business rates] were cited as the main reasons for these closures.
2015: December 2015, Tata announced that it had exclusive talks with Greybull Capital to sell a number of plants including its
steelworks in Scunthorpe and also mills at Dalzell and Clydebridge in Scotland.
2016: Announces 700 job losses at Port Talbot in South Wales.
3.3 Vision, Mission, Goals, and Strategic Themes
The journey of Tata Steel has seen the Company re-define its performance parameters constantly to become the
global steel industry benchmark for value creation and, corporate citizenship. Tata Steel ensures a total commitment to
its ethical business practices and a people oriented vision:
3.3.1 Vision
Tata Steel aspires to be the global steel industry benchmark for
Value Creation and Corporate Citizenship
Tata Steel makes the difference through:
People:
By fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.
Offer:
By becoming the supplier of choice, delivering premium products and services and creating value for its customers.
Innovative Approach:
By developing leading edge solutions in technology, processes and products.
33
Conduct:
By providing a safe workplace, respecting the environment, caring for its communities and demonstrating high ethical standards.
3.3.2 Mission
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base through the
effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent
with modern management practices.
Tata Steel recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise, profitability
provides the main spark for economic activity.
Overall, the Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear, and thereby
reaffirms its faith in democratic values.
3.3.3 Goals and Strategic Themes
Tata Steel has taken several strategic initiatives to leverage its strength and counter challenges in all its geographies.
• Some key initiatives in India include the greenfield expansion project at Odisha; entry into the steel doors segment under the
brand name Pravesh; Kar Vijay Har Shikhar (KVHS) operations programme led to improvement projects across the value chain
resulting in savings of `1800+ crores; Shikhar 25, expected to achieve 25% EBITDA in next 3-4 years and the ‘Find it-Own it- Fix it’
Safety Campaign.
• In Europe, the Company's market differentiation strategy will help develop a sustainable long-term position in its chosen markets;
and the New Product Development pipeline is enabling the launch of new products. 30 new products were launched during
Financial Year 2013-14. In Financial Year 2014-15 another 35 products were launched. In addition, an innovative new iron making
technology is being piloted which could improve resource efficiency.
• Various initiatives in Thailand include tighter working capital management; increasing proportion of rebar sales in regional areas;
developing differentiated products and services; an increase in volume of downstream products; completion of Procurement
Excellence Project along with Renoir.
34
• NatSteel is countering Chinese slowdown by sourcing billets at competitive prices and addressing pressure on margins with a two
pronged strategy:
- Enhancing value to customers by moving towards 100% value-added products. The Singapore downstream sales grew 3.7%. It
continues to enhance its downstream products and services offering to create further value. The introduction of a new Carpet
Reinforcement product is an example.
- Growing its downstream business in Xiamen (China), Johor Bahru (Malaysia), as well as set up a new JV in Hong Kong; expand its
rebar/wire rod exports into higher margin regions to maximize profitability.
3.4 Key Product and Service Portfolio
Tata Steel products are manufactured using the most advanced technology. A disciplined production process is followed at all
Tata Steel production units to ensure the products are superior in quality and consistent in mechanical and chemical properties. All
products as well as the production units are certified as per the highest national as well as international standards and carry the
same trust that the brand Tata commands.
As Steel is an essential commodity in many industries and across sectors hence the key products and offerings of TATA Steel are
used across them.
Tata Steel serves customers in all major market sectors globally, and recognises that each sector (E.g. automotive or construction
or packaging) requires different solutions to meet its specific needs. Depending on market, region and specification of the product
the offerings might vary.
Some of the sectors are:
1.
2.
3.
4.
5.
6.
7.
Automotive
Construction
Consumer Goods
Aerospace
Energy
Defence and Nuclear Equipment
Ship and Railways building
35
1. Automotive:
The automotive sector accounts for roughly 16% of all European steel consumption, and for a rapidly growing proportion of steel
demand in India and other developing countries. Steel makes up more than half the weight of a car and is used not only for the
body and chassis but also the powertrain, gearbox, wheels and tyres.
Products:
Main Brands: Galvano Galvatite® HyPerform® - advanced Dual Phase steels MagiZinc® Auto Precision Tubes Vegter Model Vegter
Lite Ymagine® Ympress® Tata Wiron® Tata Bearings Tenform
2. Construction:
From helping to build the world’s most impressive buildings to providing the metal and expertise for infrastructure projects, Tata
Steel has the products and services to meet the needs and standards of the global construction sector. The construction industry is
Tata Steel’s largest single market globally, and produces an extensive and innovative range of steel construction products and
systems, all manufactured to the same high quality. Tata Steel offers a range of products and systems that can be segmented
according to their primary function – the structural Main Brands:
Advance® Structural sections, Aquatite® ,Bor Lor Sor ,Catnic® Celsius® 355 Colorcoat HPS200 Ultra®, Colorcoat Prisma™ ,
Colorcoat Urban® ,ComFlor®, Confidex® Contiflo™ Durbar® Hybox® Infire Kalzip® ,MagiZinc®, Slimdek® Strongbox® Tata
Shaktee®, Tata Tiscon® ,Tata Tubes, Tata Structura, Tata Wiron®
3. Consumer Goods:
Tata Steel manufactures and processes steel for a wide range of customers across the Consumer Goods sector worldwide. The
product and service solutions vary: from hot rolled coil through to high-gloss pre-finished steel perforated blanks. These products
are primarily used in domestic appliances, lighting, furniture and office equipment, racking and shelving, battery cases, bakeware, enamel-coated applications and decorative pre-finished metals. Customers in this sector want a variety of quality products –
36
often tailored individually to their specifications – from a single point of contact; reliability and flexibility in supply and service;
innovation, and technical support to provide them with differentiation and competitive advantage.
Products:
Advantica® Galvano HIBRITE® HILAN® MagiZinc® Motiva® NICOR® Tata Steelium® Tata Wiron® Ymagine
4. Engineering:
General Engineering Tata Steel manufactures a range of steel products, encompassing hot rolled and cold rolled sheets, wire rod
and wire, sections, plate, bearings and tubes, which serve a multitude of small and medium-sized engineering companies in
Europe, India and South East Asia.
A variety of high-quality agricultural implements marketed as Tata Agrico are widely used throughout rural India. Similarly a range
of wire products has many applications in farming and fencing. Engineering Services, Plant & Equipment Multi-disciplinary
engineering expertise relating to the design, manufacture and supply of high- precision equipment is offered to various industry
sectors.
.
Products:
Celsius®355 Galvano Hybox® 355 Tata Steelium® Tata Wiron® Tata Bearing.
The most important brands under Steel Products are -
Tata Shaktee - Tata Steel’s most important brand in the field of Galvanised Corrugated Sheets
Tata Tiscon - First Thermo Mechanically Treated (TMT) Rebar in India
Tata Steelium – World’s 1st branded Cold Rolled Steel (CRS)
Tata Astrum - Best-in-class Hot Rolled Sheets (HRS) & Coils offered by Tata steel
Tata Structura - Lightweight Hollow Steel Sections that ensure high durability
GalvanoTM - Galvanised Plain Steel Sheet and Coils with superior corrosion resistance properties
Tata Pipes - Commercial tubes mainly used for carrying liquids and low pressure gases
Tata Precision Tubes - Robust precision tubes catering to automotive, boiler and general engineering segments
Tata Automotive Steels - Products ranging from strips to tubes, and welded blanks to automotive(advanced) steels
37
3.5 Core Competencies of the firm
The TATA Group lives by its mission and vision of Improving the Quality of Life. Hence all the TATA companies derive strength as also
the core strategy from that. Some of the instances are cited below:
-Typically, Tata’s business competes on the basis of their available tangible and intangible resources and the skills. The skill
resources are in essence the group’s core competences. It is said that “at corporate or strategic levels of management the core
competencies are difficult to manage” The Tata’s Core Strategies of exploiting its resources and competence to meet the
challenge of external environment are somehow similar to the dimensions of business excellence. The dimensions relates to the
pattern in the sequence of strategic action taken by the group. The group built their strengths and core competences and never
diversifies far away from these. The senior management has a clear understanding of their business as well as micro and macro
environment. The Group’s knowledge and experience provides the basics of their management intuition and credibility. They only
do what they know and avoid what they don’t.
- If we take the example of TATA Steel, the group sticks to the steel industry as the main aim of strategic development to achieve
cost leadership.
-The group actively is a Customer and Market Oriented corporate, listens to the customers and place excellent emphasis to deliver
quality, reliability and high level of service.
-Tata sets very high standard in these regards and ensures their achievement through reward system that includes emotional
rewards. The strategic approach is to involve the customers.
- The other value drivers of the group to successfully exploit the resources are the productivity through the people and liberty and
entrepreneurship.
- The group empowers people to make decisions about their own jobs, the culture values are that the people are not penalized for
failures they should be educated and led them to continuous improvement.
38
- The group also express concern for the feeling of their employees and try to foster attitude in which people perceive themselves
as belonging to an extended family.
Today TATA Steel has a more aggressive strategy with an eye on the global map and a new path of expansion to become a
benchmark in the global steel industry and that is through JVs and M&As.
3.6 Business Model of the organization
Key Partners



NAT Steel
Millenium Steel
Corus Steel
Key Activities




Mining
Extraction
Manufacturing
Customising
Value
Propositions


Trusted Brand
Highly Valued by all
Stakeholders
Motivations for partnerships
 More capital/fund is available and the business has more borrowing
power.
 Partners share the decision making and can help each other out
when they need to.
 That people will need to stay or work in better spaces and dress
better.
 Reward to risk ratio will increase
 To leverage synergies between Tata Steel and Corus and
accelerate performance improvement through learning and
sharing, a Performance Improvement (PI) Committee has been
constituted.
 Under this committee 7 PI groups have started functioning,
identifying Key Performance Indicators (KPI’s) to be improved and
improvement projects to be undertaken across various sites of the
Tata Steel Group.
 Over the years, Tata Steel has placed a continuous emphasis on
improving processes, with a view to consistently increasing
efficiencies, enhancing quality, and thereby achieving better
performance benchmarks in all areas.
39

Variety of Products
Customer
Relationships



Strong Base
Value Driven
Employee Friendly practises
Customer
Segments









Automotive
Construction
Consumer Goods
Aerospace
Rail and Ship building
Defence purposes
Access to Raw Material
Strategic Alliances
Skilled Manpower
Key
Resources
The various initiatives taken by the several companies in its
operations across the world have seen the development of several
models that have sustained over the years and have now become
institutions.
 These initiatives typically have been designed to encompass in their
fold all the people down the line, so that process improvement
becomes a way of life.
The process of value creation at Tata Steel is based on five key actions.
 Customer need identification through a number of active listening
and learning mechanisms.
 Analyses and prioritisation of inputs. • Evaluation of ‘potential value
for customers’ and feasibility checks.
 Implementation of pilot projects through cross functional teams.
 Monitoring of projects.
 The Company’s Long Product Division launched RAISE (Responsible
Architectural Initiatives and Structural Engineering), an initiative
promoted with INSDAG, to engage with architects and structural
engineers across India.
 The programme aims at driving responsible construction practices
and creating brand ambassadors in the process.



Channels

Cost
Structure

Traditional supply chains
directly to consumer
Processing Costs

A holistic approach to the use of natural resources led to
improvements in the productivity of customers who manufacture
continuous electrodes for the auto industry from WR3M / Low Ca
ER70S6 grades of wire rods.
The 100% increase in speed and productivity has led to a reduction
in power consumption and water that makes up for consumption in
different parts of the product’s value chain.
Steel prices are now increasingly aligning to global export prices as
markets strike a balance between imports and domestic demand.
40
Revenue
Streams


Interest on Debt
Raw Material Extraction.




Steel Tubes
Alloys
Sale of Minerals & Bearings
Sale of power and water.






China’s waning demand and resultant rise in exports poses a risk to
leveraging improving domestic demand in South Asia and Europe.
Further, movement of currencies against US$ would also have a
significant impact on the movement of global steel and raw
material prices.
Annual sales in the Automotive segment at a record 1.37 million
tonnes, as against 1.17 million tonnes in the previous year.
Annual Tata Tiscon sales at a record 1.23 million tonnes, as against
1.09 million tonnes in the previous year.
Annual Tata Shaktee sales at a record 0.23 million tonnes, as against
0.21 million tonnes in the previous year.
Annual Durashine sales at a record 100k tonnes (20% more than the
previous best).
Annual sales in the LPG segment at a record 85k tonnes and a
market share of 36% (23% in the previous year).
3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
Financial:
-Turnover at 1, 65,000 Cr by 2015.
-EBITDA at 15,000 Cr by 2015.
- PAT is at -5000 Cr by 2015.
41
-India leads in geographical distribution of revenue at 29% and in capital employed by geographies at 46% for TATA
Steel.
Customer:
-
Diversified Customer Base
Diverse Sectors & Usage: Automotive, Construction, Consumer goods, Defence etc
Increasing marketing efforts in Rail Ship, Aerospace, Nuclear etc.
Internal Business Process:
-
Adoption of TATA Business Excellence Model (Malcolm Balbridge Model) –gives strategic direction and process
improvement.
Well defined TQM Standard for controlling defects and improving quality. Statistical Process Control measures in
check.
Some of the key themes through which quality is controlled are: Throughput, Value in Use, Energy Efficiency,
Logistics and Supply chain.
Adoption of National Voluntary Guidelines to ensure transparency, ethics and care for community.
Learning & Growth:
-
Presence of four R&D centers across India to promote cutting edge technology and product variation.
TATA Steel Group Process Improvement Techniques deployment for continuous process improvement.
Growth of company has been slow due to recent global slowdown owing to Subprime Crisis. Effected by
economic cycles.
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3.8 SWOT Analysis
STRENGTHS
Experience, Micro Environment, Business Model,
Expertise, Resources and Capabilities, Culture,
Access to raw materials
Opportunities
Exports, New Products, New Markets, Mergers and
Acquisitions, Growth of Infrastructure.
WEAKNESS
Value Chain, Distribution, Macro Environment.
THREAT
Free Market, Globalisation, Economic Cyclesrecession in global economy, rising coal prices.
A SWOT analysis is important for Tata Steel to evaluate its current position and formulate strategies to tackle its
competitors.
Strengths of Tata Steel
Tata Steel is the pioneer of steel business in India and thus enjoys brand equity. Tata Steel has a multiple companies
under the same banner, which gives it an advantage of value-chain efficiency, whereby the company can utilize
products made in its sister companies to process raw materials and increase efficiency.
Weaknesses of Tata Steel
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The biggest weakness of Tata Steel is its increasing debt-to-equity ratio. Most of its assets are financed by debt, which
can be dangerous in the long-run. Tata Steel largely depends on domestic and a few international markets for
generating business. This over-dependence can prove to be fatal in times of economic crisis.
Opportunities for Tata Steel
Tata Steel is branching out to overseas market. The company has recently signed a deal with Corus group, which
provides access to European markets. Tata Steel will now be in a position to utilize the R&D facility and the patents
owned by the Corus group. Exposure to new technologies and markets is a big advantage for the company.
Threats to Tata Steel
In the current scenario, the biggest threat for Tata Steel is to maintain the Co2 emission standards when it starts its
operations in Europe. The sudden overseas exposure along with a possible economic slowdown is the biggest challenge
faced by Tata Steel in the present circumstances.
3.9 Competitor Analysis (identify competitors)
3.9.1 Based on Critical Success factors
MEASURE
WEIGHT
Tata Steel
RATING
Long Term Contracts for Raw Materials
Low Production Costs
Export Capability
Value added Services
0.50
0.25
0.15
0.10
9
9
9
8
SAIL
JSW
SCORE
RATING
SCORE
RATING
SCORE
4.5
9
4.5
6.5
3.25
2.25
8
2
7.5
1.875
1.35
7
1.75
4
0.6
0.8
8
4
5
2.5
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8.9
12.25
8.225
3.9.2 Based on Financial indicators
Steel Authority
of India
Tata Steel
Limited
Bhusan Steel
Ispat Industries]
JSW Steel
Jindal St &
Pwr
Welspun
Gujarat
Adhunik
Metaliks
Market Cap (Rs Cr)
60,303.84
23,093.28
2,635
2,078.08
8,949.82
29,260
2,320.29
508
Sales (Rs Cr)
8,920.63
4,802.14
1,119.95
1,123.55
3,573.61
1,781.07
1,456.63
258.97
Net Profit Margin (%)
18.16
23.43
10.09
0.41
14.92
22.79
8.7
7.96
4 Future Growth Strategy for the organization
4.1 Portfolio Analysis
4.1.1 Based on BCG Matrix
Focus on improving the product and service portfolio, has led Tata Steel to be uniquely positioned to serve the growth
markets globally. Also, it has given special focus on value engineering activities. Over the years, the Tata Steel Group
has placed a continuous emphasis on improving its processes, so as to consistently increase efficiencies, enhance
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quality and thereby achieving better performance benchmarks in all its areas of operations. Tata’s first brand building
endeavours have always been directed at building assurance, reliability and value creation for products in every
segment.
There are twelve market sectors in which all the TATA steel products are divided. These sectors include construction,
automotive, consumer goods, energy and power, agriculture, lifting and excavating, engineering, packaging,
aerospace, shipbuilding, rail, defence and security.
BCG Matrix of the products is:
STARS

Ferro alloys and minerals division
Infrastructural investment in Asia
resulted in improvement in
the demand for stainless steel. The
first oversees hub of Tata Steel
was established in South Korea. In
India. This division of Tata Steel is the
market leader in Ferro Chrome Business with a market
share of around 27%. TATA Steel attained the status of
being the largest producer of Manganese Alloys in
India
QUESTION MARKS

Bearing division and the tubes division
They are growing rapidly but
have low market product
share. This division has
the potential to gain market
share and become a star. It
can also become cash cow
when the market growth slows
down after reaching its potential
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CASH COWS

Steel division
The steel division without doubt
places itself in the cash cow
section due to continued revenue
returns and churn cycles
DOGS

No products
As on date, all products of
TATA Steel have a good market
share and hence none of them
fall into Dogs category. But
recent economic recession in
China has impacted the
commodity market as a whole and hence the
picture may change in the near term, but the
Moody’s rating after the Union Budget on 29th
February, gave a positive outlook for Indian steel
industry as a whole.
4.2 Company’s Strategic Roadmap for future
Growth Areas
Near Term (<- 2 years)
Mid Term (2-5 years)
Domestic Consumption:
Domestic consumption is
expected to grow at 5.3% in
2016.
Smart Cities: 100 smart cities
to be built.

Govt Projects: Metro
projects of Delhi, Bangalore,
Hyderabad and other cities,
infrastructure projects.

Govt Projects: Metro rails,
Infrastructure etc. First 20
smart cities have been
Long Term (5-10 years)
Growth of Automobile
and Construction
Sector.
The per capita
consumption of steel
in India would move
from the level of 57.8
kgs in 2013 to 175 kgs
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finalised and the next 23
cities will be finalised by April
2016. These 43 cities will
receive funds of 200 crores
each in the 2016-2017.
High Level Tasks
Growth in developing
Contributions in
in 2025-26, and given
the fact that the
population of India is
projected to grow to
1.45 billion that year,
the steel consumption
in 2025-26 is likely to
be around 250 million
tonnes.
 The goal of India to
increase share of
manufacturing to 25
per cent of GDP by
2025. The above
target if achieved
can propel the usage
of finished steel from
17.6 kgs / $ PPP in the
year 2014 to 22 – 25
kgs / $ PPP in the year
2025-26. This would
mean a growth in
steel consumption of 9
-10 per cent and the
steel consumption in
2025-26 is likely to be
around 230 – 250
million tonnes.
With more emphasis on
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countries: The construction
sector is in boom in South
East Asia with the demand
increasing by around 15 MT
per annum in the last 5
years. It needs to provide
differentiated products so as
to carve a special market
for itself as well as to have
better margins.
infrastructure, construction
and automobile sectors.
Revival of European markets
will help Tata Steel to
consolidate its position in the
European market. 52% of its
revenue comes from
Europe.
manufacturing and “Make
In India”, Tata Steel will be
involved in providing
intermediate raw materials
for the Automobile,
construction sectors, steel
intensive capital goods.
Potential Benefits to be
achieved
Enhanced global presence
and entering new markets
capture market transitions
and stakeholder satisfaction
Rewards
Increased Revenue from
foreign business and be
among the top 5 steel
producers
Global steel over capacity
and macro environment is
posing a threat to the
business.
Reduction of costs,
Economic value addition,
Technology transfer /
upgradation through
mergers and acquisitions
and entering new markets
Better profit realisations due
to cost effective production.
Tax benefits for new plants
Adverse movements in
credit rating and level of
indebtedness could affect
the financial flexibility
Growth depends on success
of capacity expansion
projects, restructuring.
Risks
Boost in export incentives
Tax benefits
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Key Success Factors
Disruption in supply of raw
materials
because
of
government regulations in
India
Captive Sources of ores;
Captive Sources of Steel,
Technology
Value Added Services;
Technology transfers
Captive Sources of ores,
Export Capability;
Technology
4.3 Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE
4.3.1 Reimagining Business Processes
With Tata Steel in the United Kingdom moving to a single SAP-based ERP system from multiple ERP systems, it became
feasible to create a genuine UK-wide procurement organisation. The vision was to extend the scope for buyers to
manage merchants and negotiate national deals. Previously, assembling data from multiple legacy systems across
the group had been a labour-intensive and error-prone process. Successfully rationalise the master data, reducing
850,000 spare part items in the UK to 300,000, with consequent economies in purchasing with the help of this SAP
project. A single SAP based ERP system will help reduce the processing time in many steps, thereby improving the
operational efficiency of the firm. The success of UK can be leveraged upon and similar practice with the necessary
modifications can be followed in India so as to ensure success.
4.3.2 Reimagining Customer Segments
In today’s increasingly complex competitive environment, organizations have to constantly strive and come up with
unique offerings that create value for the customers. They need to organize and cross-pollinate the available
resources for achieving more growth through better innovation, searching for new business opportunities across
customer segments and leveraging strengths within the organization. This has created a greater need for
collaboration, which can offer win-win solutions to both - the customers and organizations. Companies can no more
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afford to work in proverbial silos - wherein organizations are misaligned in their direction and focus. The business
process enables to get a customer perspective and thus linking all processes internally as well as with the customers.
4.3.3 Reimagining Products & Services
Tata Steel must venture into a strategy of continuously developing new products to gain a competitive edge over
competition. In Europe, it has focussed on product innovations with more differentiated products. Globally marketing
efforts must be redesigned to target customer segments so as to focus on the whole product package. Branding will
help products find increasing market acceptance. Innovations such as Silent Track, NestIn, Superlinks, BH260, BH300 are
steps in the right path of creating differentiated products so as to gain market share and also earn the required profit
margins. A constant effort at developing innovative technologies and design solutions will help transform processes,
improve inefficiencies, and enhance customer experience.
4.3.4 Reimagining Workplaces
Mergers and Acquisitions, takeovers etc. have helped Tata Steel gain the technological competence. Also, since each
of these companies had a specialized set of products/core competencies, it will help Tata Steel to bring these products
to newer markets and also it will gain access to international markets. With takeovers, there is a change in the
management and hence, the workplace atmosphere changes. Because of the changing work environments in
different countries and the problems that may arise out of it, care needs to be taken that all the necessary precautions
are taken so that a smooth transition and a conducive work environment is created.
4.3.5 Reimagining Channels
Although TATA Steel touches the lives of millions on a daily basis yet the ordinary person is not a consumer. Steel
effectively works on a B2B model and hence leveraging social media as a means to market is challenging.
However the Social Effectiveness Index (SEI) developed by the Blue Ocean Strategy firm shows TATA Steel to be
amongst the most active organisations on the social media platform.
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TATA Steel began its Facebook initiative in 2010 with a view to provide information on the company’s activities and on
the product portfolio. However today TATA Steel uses this medium to interact with the consumers, be it for ideas for
better products or making people a part of its community based initiatives (CSR events). The entire endeavour is to
harbour a culture of continuous learning and feedback and to harness the power of social media in the same.
The above images show the Facebook page of Tata Steel which shows on the cover page the various landmarks where
Tata Steel has been used. An effective marketing and brand building strategy which showcases the wide usage of Tata
Steel’s products in places of national importance. Facebook initiative is instrumental in the Tata group as no other
company uses Facebook at a product level such as used by TISCON. As also visible in the image above Tata Steel seeks
to communicate its values and vision and how the events it organises are in resonance with those. Some of the
objectives are achieved through other means as well:
- Sharing and dissemination of information: Blogs, Wikipedia, YouTube, Facebook
- Employee Engagement is done through internal blogging sessions. Helps in ideation and innovation.
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Apart from driving brand awareness campaigns through social media marketing for developing an effective sales pitch,
Tata Steel is increasingly making use of Social media and analytics to connect with its customers. Social media platforms
have become an integral part of its corporate communications. It has begun reaching out to social networking
websites to spread its messages on environmental awareness across the country. This message has received wide
acclaim and was successful in reaching to a wide audience due to a high octane social campaign. YouTube is also
being used very effectively wherein the company processes, developments etc. are shared to the public so as to build
the brand image.
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